Record current-account deficit

The overall economy in April moderated on the back of softening domestic spending, while exports and export-oriented manufacturing recovered slowly in line with the gradual global economic recovery, according to the Bank of Thailand’s “Economic and Monetary Conditions in April” report. 

Manufacturing production was further dampened by temporary factors, the reduction of production by some industries in response to the government’s request for less energy use during April, and raw-material shortages. As a result, overall manufacturing production contracted, but tourism continued to expand robustly. 

On the stability front, inflation eased and unemployment was low. The trade and current accounts recorded deficits while the capital account was in surplus from short-term borrowings by financial institutions to manage liquidity in the foreign-exchange swap market and non-resident portfolio inflows. The Private Investment Index (PII) declined by 1.1 per cent year on year from machinery and equipment investment, which had previously picked up strongly in the post-flood reconstruction period. 

With a delay in global economic recovery, some export-oriented businesses also postponed investment. At the same time, construction investment slowed down after a period of acceleration. 

The Private Consumption Index (PCI) expanded by 1.7 per cent year on year, softening slightly from the previous month’s growth rate in line with decelerated car purchases owed partly to the high base effect as a major car manufacturer fully resumed production after being hit by the floods and accelerated delivery a year ago. Nevertheless, overall consumption continued to have momentum with support from favourable non-farm employment and income. As a result, value-added-tax collection and imports of consumer goods expanded. 

Some moderation in private consumption growth was attributable to farm income that declined by 7.7 per cent year on year from both price and output factors. Agricultural output contracted from paddy rice and cassava as a result of unfavourable water-supply and weather conditions. Agricultural prices fell in line with reduced rubber demand from China, whose rubber inventory remained high. Merchandise export value stood at US$17.251 billion (Bt522.1 billion), up by 3.7 per cent year on year as manufacturing exports slowly improved along with foreign demand. However, exports of rice and rubber declined from a slowdown in orders while exports of frozen prawn contracted as a result of supply shortages due to prawn disease. 

The tourism sector grew robustly, with 2.1 million foreign tourist arrivals or an expansion of 21.6 per cent year on year, with a growth in the number of tourists from almost all regions, notably China and Russia. 

Temporary deceleration of production in some industries to conserve energy, raw-material shortages, and a slow recovery of exports contributed to a contraction in overall manufacturing production. The Manufacturing Production Index (MPI) thus declined by 3.8 per cent on year, largely on lower production of hard-disk drives, integrated circuits and parts, and frozen processed food. Automobile production expanded at a slower pace than in the previous month. 

During April, imports of raw materials and intermediate goods picked up, mainly fuel imports in preparation for production speeding up to compensate for the temporary shortage of natural gas supply from Myanmar. Coupled with expanding private consumption and a state enterprise’s import of aircraft, this led to merchandise imports of $18.871 billion, up by 8.5 per cent year on year.

On the stability front, the unemployment rate was low, and headline inflation moderated to 2.42 per cent year on year, thanks to softening energy prices. The current account registered a deficit from both a trade-balance deficit and accelerated transfers of profits and dividends. 

The capital account recorded a surplus of $4.166 billion from short-term borrowings by financial institutions to manage liquidity in the forex swap market and non-resident portfolio inflows. The overall balance of payments was in a slight surplus.

Thailand experienced a record-high current-account deficit in April of $3.361 billion, according to the BOT.

Methee Supapong, director of the central bank’s Domestic Economy Department, said this was due to a trade deficit of $1.620 billion and balance-of-payments deficit of $1.742 billion. It is the highest current-account deficit since BOT started collecting economic data in 1995.

The value of the country’s export in April was $17.251 billion, up 3.7 per cent year on year, versus import value of $18.871 billion, up 8.5 per cent.

Thailand enjoyed a current-account surplus in March of $1.936 billion.