Thailand’s external trade ends 2020 on a positive note
Thailand's worst year seems to be over. But with persistently weak domestic demand and lack of tourism, the Thai government’s view of the economy bouncing back by 3-4% in 2021 hinges on vigorous export recovery. We're quite sceptical
| 4.7% |
December export growthYear-on-year |
| Higher than expected | |
First positive growth in months
Year-on-year export growth in most Asian economies surprised on the upside in December, which is why we expected Thailand’s exports to join the crew too. And we were right.
Exports turned a corner to positive territory in December, rising by 4.7% from a year ago after contracting by -3.7% in November surpassing our forecast of 2.0% YoY growth and the consensus view which was centred on continued contraction. The December data ends the negative export growth streak that was in place since May 2020.
Exports ended the negative growth streak that was in place since May 2020.
Among the key export drivers, electronics staged a strong rebound by 15.9% YoY (prior -1.4%), agricultural products posted a modest pick-up by 2.1% (prior -2.4%), but automobile and parts exports softened by -0.2% (prior 1.6%).
Imports followed exports on the growth path too, posting a 3.6% YoY growth in December after having a slightly longer negative stretch than exports. Capital goods and raw material imports stood out with 8.9% YoY and 11.2% growth respectively.
The trade surplus jumped to $964 million from $53 million in November, which was the lowest monthly surplus in 2020.
The worst year is over
December data brings FY20 export contraction to -6.0%, and import contraction to -12.4%, which caused a sharp widening of the annual trade surplus to $24.5 billion from $10 billion in 2019.
However, a large trade surplus wasn’t enough to offset Covid-induced dent to services inflow, resulting in a significant narrowing of the current account surplus in 2020. The cumulative surplus of $17 billion in the first 11 months of last year was almost half its level a year ago (December data is due next week, 29 January).
Looking ahead, with persistently weak domestic demand and lack of tourism the Thai government’s view of the economy bouncing back by 3-4% this year hinges on vigorous export recovery but we're sceptical.
Trade and current account balances
A resilient currency
Falling current surplus has been the main drag on investor sentiments towards the Thai baht (THB) recently, alongside authorities talking down the appreciation pressure to aid potential export and tourism recovery. Even so, the currency has been pretty resilient to these developments, partly to a broader emerging market rally since June last year.
The markets continue to defy the authorities' efforts to curb the THB strength.
Staying on course to curb currency appreciation pressure, the Bank of Thailand launched fresh measures earlier this month allowing non-financial companies with trade and investment in Thailand to manage currency risks and THB liquidity more freely. Like many of these measures, we're doubtful of this working too.
The USD/THB exchange rate has been steady around 30.0 since December - and we see it continuing to hover around here in the months ahead until the Covid-19 situation stabilises. Our end-2021 forecast for this pair remains at 29.3 (spot 30.0).
Tags
ThailandDownload
Download article
25 January 2021
Good MornING Asia - 25 January 2021 This bundle contains 2 articles"THINK Outside" is a collection of specially commissioned content from third-party sources, such as economic think-tanks and academic institutions, that ING deems reliable and from non-research departments within ING. ING Bank N.V. ("ING") uses these sources to expand the range of opinions you can find on the THINK website. Some of these sources are not the property of or managed by ING, and therefore ING cannot always guarantee the correctness, completeness, actuality and quality of such sources, nor the availability at any given time of the data and information provided, and ING cannot accept any liability in this respect, insofar as this is permissible pursuant to the applicable laws and regulations.
This publication does not necessarily reflect the ING house view. This publication has been prepared solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.
The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.
Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved.
ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam).