JANUARY TRADE FIGURES: Highest deficit since 1997 crisis

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Tsunami impact felt, but central bank not worried

In January, Thailand recorded its highest monthly trade and current-account deficits since the 1997 crisis, heightening concern about macroeconomic stability over the long term.

According to the Bank of Thailand, higher import bills triggered a trade deficit of US$1.48 billion (Bt56 billion) in January, the largest deficit in 93 months. Exports rose by 11.6 per cent to $7.69 billion, while imports hit a record high of 33.6 per cent or $9.17 billion.

With dwindling tourism receipts, the country posted a service-account surplus of only $350 million. As a result of the tsunami disaster, the number of international arrivals fell 26.9 per cent in January to 890,000.

This resulted in a current-account deficit of $942 million, also the largest since the 1997 crisis.

Suchada Kirakul, director of the central bank’s Monetary Policy Group, said the bank was not concerned since the country should continue to enjoy a current-account surplus this year of between $2 billion and $4 billion.

This is based on the assumption that the tsunami will only hurt the tourism sector in the first quarter and that the price of crude oil will average $36 a barrel, she added.

“Imports surged to record highs, but that should not be a cause for concern as it points to signs of increasing production and investment in the months ahead,” said Suchada.

Earlier Anusorn Tamjai, the managing director of BT Asset Management, said higher oil bills, if aggravated further, would hit the trade account and result in an outflow of capital and a weaker baht.

The record import bills in January could be attributed to a surge in oil imports, which jumped 80 per cent compared to the same period last year. Imports of machinery, equipment and steel also grew 60 per cent due to an expansion of investment both in the public and private sectors.

Gold imports for use in the jewellery industry also surged 438.5 per cent due to higher gold prices on the world market.

In December, the Kingdom recorded a hefty trade surplus of $813 million and a current-account surplus of $1.37 billion.

The manufacturing production index (MPI) rose a sluggish 3.9 per cent over the year through January, easing away from a revised 5.3 per cent pace in December and 11.7 per cent in November, according to Reuters.

Analysts had estimated a 4.25-per-cent rise in the MPI during the year through January.

“From the production side, we see more signs of a slowing economy. The MPI has decelerated to low single-digit growth from the double-digit expansion seen in the third quarter of 2004,” said Nuchjarin Kasemsukworarat of SCB Securities.

The December 26 tsunami killed more than 5,300 people in Thailand and devastated several dozen luxury hotels at popular resorts in Phuket, Krabi and Phang Nga along the Andaman Sea.

“Tourism fell considerably as a result of the natural disaster on the Andaman coast with tourist income and the number of tourists falling by 25 per cent and 26.9 per cent year on year, respectively,” the Bank of Thailand said in a statement.

Published on March 01, 2005

 

Anoma Srisukkasem

The Nation