Thailand: Trade balance clings to surplus in June

Beating the consensus, the trade surplus widened to $1.6bn in June from $1.2bn in the previous month; the consensus forecast was $1.3bn, while we were expecting a small deficit. Exports grew by 8.2% year-on-year and imports by 10.8%, though both fell short of the 11% growth registered in May. Electronics and autos have been the main export drivers this year, whereas fuel has been the dominating commodity on the imports side.

However, the cumulative trade surplus of $3.5bn in the first half of 2018 has more than halved from the $7.6bn surplus of a year ago. Trade balance drives the current account balance. Indeed, the $17.3bn current surplus in the first five months was $1.4bn less than a year-ago.

After a strong run in the last four years, Thailand’s external payments have started to weaken this year and foreign exchange reserves have started to fall after peaking over $215 billion in March. These trends are here to stay as the global trade war threatens exports and confidence-sensitive capital inflows while rising oil prices boost imports. We forecast that the annual current surplus in relation to GDP will narrow to 7.5% in 2018 from 10.6% in 2017.