Thailand Logs Dismal Export Performance In September

Thailand's trade surplus missed consensus expectations in September as both exports and imports slowed, and the current account surplus remained large enough to sustain the positive sentiment towards the Thai baht, ING economist Prakash Sakpal said Monday.

The trade balance swung to a surplus of $487 million in September after two consecutive monthly deficits, preliminary data from the Thai Commerce Ministry showed. This was smaller than the $1.8 billion surplus economists had predicted.

Exports shrunk 5.2 percent year-on-year, reversing August's 6.7 percent growth. The decline was the first since early 2017. The pace of growth in imports slowed to 9.9 percent from the 22.8 percent surge in August.

The ministry attributed the weak export performance to a high base effect, the US-China trade tensions, and problems in some emerging markets. "Data clearly undermines the Ministry's expectations of sustained export growth in 2019 projected at 8 percent on the back of strong demand from China and ASEAN countries," Sakpal noted.

"The escalation of the US-China trade tensions will remain an ongoing threat to exports in the period ahead," the economist said. "But on a positive note, it could also open the opportunity for increased intra-regional trade to bypass tariff barriers."

The current account surplus for the January to September period was $2.8 billion, which was $10.4 billion narrowed than a year ago.

At this rate, the full-year 2018 trade balance could be in deficit to the order of $1 billion against over $15 billion of surplus in 2017, Sakpal said. ING expects the current account surplus to fall to 7 percent of GDP this year, with the risk biased to the downside, versus the plus 11 percent logged in the last two years.

"It's still large compared to other Asian economies, which is what lies behind Thai baht's (THB) ongoing outperformance among Asian currencies this year," Sakpal said.

"We maintain our end-2018 USD/THB forecast of 33.0 (spot 32.6)."