Thailand: Export growth remains strong in June despite escalating US-China trade tensions
July 23, 2018
Thailand’s trade surplus grew to a seven-month high of USD 1.6 billion in June, up from the USD 1.2 billion surplus registered in May, primarily due to softer import growth. The 12-month sum of the trade balance, however, fell to a near three-year low of USD 11.0 billion in June from an upwardly revised USD 11.3 billion in May (previously reported: USD 10.8 billion).
Although export growth eased, to 8.2% in USD terms over the same month a year prior (May: +11.4% year-on-year), it nonetheless remained robust, marking the 16th consecutive month of expansion. Foreign demand for pistons and internal combustion piston engines, steel and steel products, and machinery and mechanical components was particularly strong in June. In addition, exports of chemicals, processed oil, and computer equipment and components also recorded solid growth. Demand from the United States and China was notably robust in June. Meanwhile, import growth continued its downward trend, moderating to 10.8% over the previous year in June from 11.7% in the prior month.
Last year, exporters became concerned over the strength of the Thai baht against the U.S. dollar. However, available trade data for the year to date points to a narrowing trade balance surplus, in part due to increasing global trade protectionism. Combined with low interest rates, the narrowing surplus is putting downward pressure on the THB, which traded at 33.2 per USD on 18 July, a weakening of 3.4% year-on-year. A weaker baht could make Thai exports more attractive and thus propel export growth. However, escalating trade tensions between the United States and China represent a major downside risk to the external sector’s outlook.
Author: Lindsey Ice, Economist