If a dual deficit persists for 3-5 years, referring to the fiscal balance and current account, it could weaken the forces underpinning Thailand's economic growth and reduce the economy's momentum, warns an economist from Thailand Development Research Institute (TDRI).
Nonarit Bisonyabut, a research fellow at TDRI, said Thailand's economic strength has traditionally been rooted in its current account surplus, which brought foreign capital into the country and helped support economic activity. The government maintained budget deficits during this period, providing an additional source of stimulus by injecting funds into the economy.
"A dual deficit means these two sources of economic support become less effective or cease to function adequately. Foreign capital inflows decline, while government borrowing becomes more difficult as fiscal risks increase," he said.
"If we play this out into the future, it is a worrying development."
Historically Thailand has enjoyed a trade surplus. While the nation continues to run a trade surplus with the US, it is recording an even larger trade deficit with China.
In the past, the economy was supported by a services surplus, particularly from tourism, with foreign arrivals increasing from 10 million in 2001 to nearly 40 million in 2019. Now tourism revenue has begun to stabilise.
Thailand currently runs a services deficit, particularly due to purchases of intellectual property and high-tech products from the US, such as software and expenditures on digital platforms like Netflix.
"Looking ahead, I am afraid Thailand's services deficit will become significantly larger. If the trade balance also turns negative, it means our current account will remain in deficit over the long term," Mr Nonarit said.
Thailand has run budget deficits continuously for more than 20 years, and continued borrowing will gradually reduce the country's borrowing capacity, he noted.
"This is a long-term problem. While the situation may improve somewhat in the short run, looking three, five or more years into the future, Thailand is highly likely to face a dual deficit scenario," said Mr Nonarit.
Part of the problem stems from structural weaknesses in the Thai economy, as economic growth has not been distributed effectively and inclusively across all sectors, he noted.
As a result, when money is injected into the economy, it does not circulate as widely as it should; instead generating a one-time effect before dissipating, said Mr Nonarit.
"We have to urgently address our structural economic problems, particularly in the export sector, which faces intense competition from low-cost Chinese imports that have been capturing market share and adversely affecting Thai small businesses. Strengthening our competitiveness is an urgent matter," he said.
"Any increase in exports should not coincide with imports growing even faster than exports, as this would imply that economic growth is being achieved through greater dependence on external sources rather than through Thailand's own productive capacity."
