Lack of domestic demand to result in current account surplus in Thailand

Goods exports and imports in April went down by 3.3% and 17%, respectively.

Fitch Solutions published a report showing Thailand’s current account surplus shrunk to 6% of GDP in 2020 YTD compared to 7% in the same period last year. In April, goods exports and imports were reduced by 3.3% and 17%, respectively. In services exports, transport and travel activity fell 23.1% and 37.6% YoY.

Lack of domestic consumption demand with a higher propensity to save will likely put further pressure on the demand for imports in the near term. Fitch estimated the savings rate to stand at 29.5% with domestic consumption accounting for 66.2% of GDP. Consumer confidence stood at 48.2 in May, down from 68.3 in December 2019, which will likely result in lower consumption and higher savings. Reflecting weak demand side pressures, the headline inflation rate fell to -3.4% YoY in May. Similarly, producer prices contracted 4.8% YoY in May and manufacturers reported lower output prices due to weaker demand. In addition, deflation has aggravated household debt, which at 69.2% of GDP as of Q4 2019 is relatively high. As a result, Fitch Solutions stated that the propensity to save will remain elevated over the coming quarters, further curbing imports.

Without signs of a recovery in domestic demand, businesses are being reluctant to invest, the report added. Despite the attractive business environment and incentives introduced under tax break packages like the ‘Thailand Plus Package’, foreign direct investment (FDI) outflows and inflows averaged 3.1% and 1.7% of GDP, respectively, from 2015 to 2019. Fitch Solutions further expects the central government budget deficit to widen to 6.2% in FY2020-2021. Measures such as providing funding cash handouts to affected workers, lower utility bills and tax relief will temporarily narrow the current account surplus. In addition, reducing the domestic consumption and savings rates is projected to ultimately drive up the current account surplus as external demand recovers.

Join Singapore Business Review community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

The sector scored 72.7/100 points in customer satisfaction in the Customer Satisfaction Index of Singapore.
The new system, set for implementation in 2022, will provide migrant workers with quality, affordable and accessible healthcare catered to their needs.
Four medical suppliers saw an average 48% increase in stocks as markets reacted to the new variant.
Their pre-departure tests in South Africa on 26 November were negative.
The new skills maps serve as a resource for training providers and financial institutions to design family office-related training.
Its high costs make the country a top choice for companies with higher-valued-added manufacturing.
HongKongLand had the most growth for the day.
It surpassed the Bloomberg consensus estimate of 14.5%.
The agreement aims to grow tourism and economic activities as borders reopen. 
It will also enter a loan agreement worth $210.6m.
The acquisition will be fully funded by cash through internal resources.
These countries are Cambodia, the Maldives, Sri Lanka, Thailand, and Turkey.
The decrease was driven by profit declines in their beer and non-alcoholic businesses.
Sources say the state-owned Chinese firm is in talks with advisers about the potential divestment.