Thailand’s Trade Deficit Expands Amid Surging Imports and Strengthening Baht

Thailand’s trade deficit reached $2.73 billion in November, driven by a 17.6% rise in imports. A stronger baht threatens export competitiveness, impacting economic growth amid sluggish export growth of 7.1%.

Key Points

• Thailand experienced a larger-than-expected trade deficit of $2.73 billion in November, driven by a 17.6% increase in imports outpacing 7.1% export growth. This raised concerns over economic risks tied to a stronger baht affecting competitiveness.
• Exports to the US surged 38% due to demand for electronic products, but the baht, now at a four-year high, raises worries about key agricultural exports. Efforts are underway to manage trade relations with the US amid upcoming elections.
• To address the strong baht, authorities are considering tax measures on gold transactions. Export growth predictions range from a decline of 3.3% to a rise of 1.1% next year, influenced by US tariff negotiations and currency fluctuations.

Thailand’s Trade Deficit Increases Economic Concerns

In December, Thailand reported a trade deficit of US$2.73 billion, exceeding forecasts of US$1.36 billion. This follows a US$3.4 billion deficit in October, marked as the largest gap since January 2023. The import surge of 17.6%, outpacing sluggish export growth of 7.1%, reveals significant economic vulnerabilities. As exports constitute over half of Thailand’s GDP, the strong baht presents challenges to competitiveness in global markets. The impact of currency strength on exports raises concerns about economic stability in the face of slower global demand.

Trade Dynamics and Government Response

Despite sluggish overall export growth, Thai exports to the US saw a 38% increase in November, driven by demand in the artificial intelligence sector. Prime Minister Anutin Charnvirakul is prioritizing improved trade relations with the US while navigating complex diplomatic ties, particularly regarding a peace deal with Cambodia. However, with elections approaching in February, concessions over the border dispute become delicate. Amid rising gold prices strengthening the baht, concerns arise about its detrimental effect on key exports, particularly agricultural products, according to Nantapong Chiralerspong, director of the Trade Policy Office.

Future Outlook and Strategic Measures

Looking ahead, exports are anticipated to grow between 11.6% and 12.1% this year, contingent on the strength of the baht and December’s electronic shipments, with growth projections for next year ranging from a 3.3% decline to 1.1% increase. These figures are influenced by ongoing US tariff negotiations. To address the baht’s strength, the finance ministry and central bank are contemplating new taxes and trading restrictions on gold transactions. Additionally, the commerce ministry is enhancing oversight of product origins to mitigate potential trade tensions with the US over goods transshipped from China, signaling proactive measures in trade policy.

Source : Thailand trade deficit widens as imports surge, baht strengthens