A better-than-expected rebound in foreign tourist arrivals, lower oil prices and sliding shipping costs are brightening the outlook for Thailand’s current account, potentially offering a reprieve for the country's currency trading near a 16-year low.
Southeast Asia’s second-largest economy posted a surprise current-account surplus in September and with tourist arrivals gathering pace, the broadest measure of trade may get better in the fourth quarter, according to economists from Standard Chartered Plc and Australia & New Zealand Banking Group.
The current-account surplus may reach as much as US$3 billion during October-December period though a lot will depend on the trajectory of energy prices, said Krystal Tan, an economist at Australia & New Zealand Banking Group. Increased flight connections and the recent easing in border measures in key source markets like Japan, Taiwan and Hong Kong will fuel the tourism recovery, Tan said.
A return to current account surplus should help ease a selloff in baht that’s slumped almost 12% this year to a 2006-low as the dollar rallied against most currencies amid rising US interest rates. The Bank of Thailand (BoT) has lagged its peers in hiking rates, saying it will follow a measured approach to policy normalisation to shield a fragile economic recovery.
“All else equal, an improving current-account balance should help lower pressure on the baht, but the currency trajectory will still be beholden to external developments,” Tan said.
The current account posted a deficit of $17.7 billion in the first nine months of the year, wider than the Bank of Thailand’s full-year forecast for a $14.4 billion shortfall. But it might swing back to a surplus of $5.6 billion next year, the Finance Ministry said last week.
But the turnaround in current account alone may not help reverse baht’s fortune as “it is fighting against the large and widening rate differentials between Thailand and countries aggressively raising interest rates to quell inflation, said Pipat Luengnaruemitchai, chief economist at Bangkok-based Kiatnakin Phatra Securities Pcl.
Standard Chartered expects baht’s performance to reflect Thailand’s improving economic fundamentals, its Bangkok-based economist Tim Leelahaphan said. Tourism recovery will gather further momentum as “hopes are high for the peak season” until the end of the first quarter next year, he said.
“Monthly tourist arrivals, while still far below the 3 million pre-pandemic level, are a clear boon to the current account,” Tim said. “Thai baht should be in line with Thailand’s economic fundamentals that are improving.”
