Thailand: Exports continue to beat market expectations in June
July 20, 2017
Thailand’s external sector continued to defy analysts’ worries that a strong baht could have a negative effect on its performance. In June, the trade balance recorded a USD 1.9 billion surplus, more than doubling the previous month’s trade balance surplus of USD 0.9 billion and marking the best result since September 2016. However, June’s surplus was slightly below that of the same month last year, which stood at USD 2.0 billion. The 12-month sum of the trade balance came in at a USD 15.5 billion surplus in June, slightly below May’s USD 15.6 surplus. Despite the continued strong performance of the external sector, June marked the fifth consecutive monthly decline in the 12-month sum.
Exports grew 11.7% on an annual basis in June and rose for the fourth consecutive month, beating market expectations of a 7.9% increase. However, growth moderated from May’s 12.7%. Strong growth in the export of computers and parts offset declined demand for car parts and accessories. Imports rose 13.7% and expanded at a healthy pace, albeit at a slower rate than in the previous month (May: +18.4% year-on-year).
Upbeat exports data in recent months suggests that the trade-dependent Thai economy is gaining steam. The strong baht, which analysts see as a potential drag on exports growth, edged up against the U.S. dollar in light of June’s trade data. The Thai baht has risen almost 7.1% against the greenback so far this year. Hovering near a 26-month high against the U.S. dollar, the strong currency has not affected economic growth yet although it is lagging behind regional peers. As exports largely drive economic growth in the second biggest economy in ASEAN, analysts are wary of technical corrections to the strength of the baht going forward. Nonetheless, the government expects exports to grow 5.0% this year, despite the strong baht. However, some Thai industry leaders fear that the strong baht will catch up with the export sector and have requested that the Central Bank intervene in the foreign exchange market.
Author: Jan Lammersen, Economist