Thailand’s Winning Combo: Cheap Oil, Tourism and Leicester City
When you talk about hefty trade surpluses, names likes China, Germany, Japan, and South Korea take top spot on the list of usual suspects.
Thailand is known best for its food, beaches and more recently, Leicester City – the English Premier League Winners who have, owing majorly to their sudden rise to stardom, managed to rack up the highest current-account surplus when compared to other major emerging markets of the world.
This current-account surplus in Q1 rose to an annualized 10.2% of gross domestic product, which was an improvement that the chief economist at BNP Paribas for Asia, Richard Iley described as “phenomenal.”
Much of this buffer boils down to a dramatic fall in oil prices, with Thailand relying on crude oil imports for more than 80% of its energy needs together with a drastic surge in tourism propelled by Chinese shoppers. Thailand attracted 7.9 million Chinese visitors last year, which was a 70% increase from 2014.
Thailand has been utilising the windfall to exhaust its foreign-exchange reserves by around $20 billion this year, contributing to a key bulwark incase it is faced with an immediate surge in foreign-exchange market volatility or capital outflows. The generated surplus reserves, according to BNP Paribas; have been the fastest in comparison to any other emerging market.
Besides being one of the largest short-term spikes in the country’s reserves in the last two decades, Thailand still remains an outlier in the emerging market universe.
There’s some bad news though. This favourable current-account data has also lead to hesitation by households and companies to spend the cheaper energy dividend, thereby pointing towards a deeper malaise in the Thai economy.
The rates of savings soared to 33% of GDP in Q1, while investment has diminished, according to BNP.
Richard Iley concluded by saying that this unfavourable pincer movement was a phenomenon of the private-sector with depressed spirits parting with corporations that were not willing to increase investment and households that were not willing to increase spending, in spite of the boost to real incomes – a byproduct of lower commodity prices.
Keywords/ – Thailand, BNP.