ASEAN Rhythm | Economy | Southeast Asia
The development, fueled by the revival of the tourism sector, suggests that the country is beginning to recover from the pandemic in earnest.
Tourist bars and restaurants line Bangla Road in Patong on the Thai island of Phuket on May 1, 2019.
The Bank of Thailand reported that in September there was a $623 million surplus in the current account, which measures the balance of tradable goods, services and income inside and outside the country. This is despite the fact that Thailand has seen the value of imports soar this year as a result of soaring global energy prices. So what does this mean? It’s something good? Given the way Thailand’s economy is structured, government officials would almost certainly view this as a positive development. And in a broader sense, it shows that the economy is beginning to recover from the pandemic in earnest.
Thailand’s political economy is based on exports. It has positioned itself, quite successfully, as an important export center and world tourist destination. The ultimate goal is for foreigners (whether tourists or businesses) to spend their foreign currency in Thailand in exchange for goods and services. That is the backbone of the country’s economic model. They want the value of the goods they export to exceed the value of imports and to bring in a large amount of foreign exchange through the tourism sector. Generally speaking, if this strategy works, it will result in a current account surplus for the country, as more foreign currency is spent within Thailand than outside of Thailand.
Due to this reliance on exporting goods and services to foreigners, Thailand was particularly hard hit by the pandemic. The tourism sector alone generates tens of billions of dollars in foreign exchange and is one of the key reasons Thailand ran massive current account surpluses before the pandemic. Losing those inflows puts a lot of pressure on this particular economic model. In 2019, Thailand had a current account surplus of $38 billion. In 2021, with tourism blocked, the current account changed to a deficit of $10 billion.
For Thai policymakers, it was critical to return to their preferred style of export-led growth as soon as possible. That’s why they were pushing things like the Phuket reopening so vigorously last year. And, in fact, the trade balance has been in constant surplus, which means that even during the pandemic, the value of goods exported by Thailand has exceeded the value of imports, except very recently due to the high cost of imports. of energy and raw materials. What has been needed has been a recovery in the tourism sector.
And now we’re starting to see that, for the first time since the pandemic began. The balance of services, primary and secondary income was -$1.2 billion in September this year, the smallest deficit Thailand has posted in this category since February 2020. As a point of comparison, in September 2021 the balance of services and revenue was -$4.5 billion. The reduction in this deficit almost certainly reflects a strong recovery in inbound tourism, helped by a weakening baht and the return of international travel. Once again, foreigners come to Thailand and spend their money on services, such as tourism. Bank of Thailand reports 1.3 million foreign tourists they arrived in September, up from 12,000 in September 2021. This is the largest number of foreign tourists Thailand has seen since February 2020.
This trend is likely to continue through 2023. As global energy prices moderate next year, and even more foreign visitors return to Thailand, it seems likely that the kind of large current account surpluses that Thailand has used to become a regular feature of Thailand again. the economy. If the baht remains weak against the dollar for a while, it will give this whole process a boost. Taken together, all of these signs indicate that Thailand’s economy is on track to return to its pre-pandemic trajectory, and September’s current account surplus is likely no fluke.