Thai economy constrained by trade deficit, to see smaller surplus in 2023: Barclays

THAILAND is projected to suffer a large current account deficit in 2022, even as international tourism arrivals gain ground, said Barclays in a Thursday (Oct 13) report.

The research team revised its current account deficit forecast for 2022 to US$15.7 billion, up 80.5 per cent from its previous forecast of US$8.7 billion. It also cut its surplus estimations for 2023 by 41.8 per cent to US$5.3 billion from US$9.1 billion.

The change in Barclay’s 2022 deficit projections came as the country registered an unexpectedly large current account deficit of US$7.6 billion in July and August 2022 – the two months when Thailand received more than 1 million tourists. 

A reversal to a surplus in September is unlikely even with a good showing for goods trade in September, which, in Barclay’s view, is already a “low probability outcome”.

Thailand has seen persistent and large (above US$1.5 billion) deficits since April 2022. Although high energy prices are to blame for a substantial part of the deficit, slowing exports have also been a factor. 

Analyst Shreya Sodhani said exports growth was hindered by trade partner China’s lockdown and sluggish recovery, as well as a slowdown in demand for Thai electronic exports.

Meanwhile, the increase in imports was driven mainly by fuel prices, although non-fuel imports increased slightly too. The ongoing Thai economic recovery and rising household incomes due to returning tourists have also contributed to an uptick in import demand.

Sodhani believes while tourism continues to slowly recover, its contribution to the current account balance is likely to be muted in light of Thailand’s widening freight deficit. 

“With freight payments more sensitive to higher freight costs than receipts, it will take a while for the freight deficit to return to more normal trends, even as freight costs decline,” she said. 

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A return to large tourism surplus is needed to offset the freight and other services deficit, before mitigating the goods trade gap. 

That being said, Barclays expects rising tourism receipts to cushion the trade shock in Q4 – the time when European tourists tend to arrive in larger numbers. This could lead to a current account surplus in Q4.