Bangkok: In the realm of international investment, the stability of emerging economies is frequently assessed through indicators such as the "balance of payments." Countries grappling with "twin deficits," or simultaneous fiscal and current account deficits, are often deemed high-risk. Dr. Pipat Luangnarumitchai, Chief Economist of Kiatnakin Phatra Financial Group, has scrutinized Thailand's situation, noting significant indicators of this shift.
According to Thai News Agency, data from the Bank of Thailand reveals that the country recorded a current account deficit of US$7.6 billion in April, marking the highest deficit on record. Dr. Pipat attributes this surge to two technical and short-term factors: global oil prices and technical factors. Thailand, being a net importer of substantial oil, faced increased out-of-country payments when oil prices nearly doubled in a short period. Additionally, a shortage of imported oil in March due to the war led to concentrated imports in April to compensate for the shortfall.
More concerning than oil prices is the declining trade surplus trend that predated the oil crisis. Dr. Pipat identifies three main structural challenges for Thailand: industry transition, shifting balance of services, and imports for investment. The transition from internal combustion engine vehicles to electric vehicles (EVs) has resulted in a higher proportion of imported parts, affecting Thailand's revenue in the traditional supply chain. Despite the recovery in tourism, Thailand is incurring higher costs for services abroad, including goods transportation and digital services. Furthermore, machinery and equipment imports to support new investment projects, such as data centers of large global companies, lead to a negative trade balance in the short term.
Dr. Pipat reassures that Thailand is not currently in a crisis, as the deficit level remains around 1% of GDP, which is low compared to countries with deficits as high as 5-7%. However, allowing this trend to continue without intervention could jeopardize Thailand's "safe haven status" and lead to increased volatility in the baht exchange rate. This would necessitate more cautious monetary and fiscal policies, limiting the government's ability to cut interest rates or run large fiscal deficits as done during high current account surpluses.
The sustainable solution lies in creating new economic engines and integrating SMEs into global supply chains. The government must enhance "competitiveness" by ensuring a robust economic engine capable of international competition. Integrating domestic entrepreneurs and SMEs into new investment supply chains, such as the EV or data center industries, would reduce reliance on imported components and foster genuine domestic economic activity.
Dr. Pipat emphasized the need for caution, stating, "We need to start being cautious from today. Even though there are no worrying issues today, if we let things continue without taking action, the stability of the Thai baht could reach a point of instability in the future."