Beat ASEAN | Economy | South East Asia
The development, driven by the revival of the tourism sector, suggests the country is beginning to recover in earnest from the pandemic.
Tourist bars and restaurants line Bangla Road in Patong, Thailand’s Phuket island, May 1, 2019.
The Bank of Thailand reported that in September there was a surplus of $623 million in the current account, which measures the balance of tradable goods, services and income to and from the country. This is even though Thailand has seen the value of imports soar this year due to soaring global energy prices. So what does this mean, and is it a good thing? Given the way the Thai economy is structured, government officials would almost certainly see this as a positive development. And in a broader sense, it shows that the economy is starting to recover in earnest from the pandemic.
Thailand’s political economy is built around exports. It has very successfully positioned itself as a major export hub and a global 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. It 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 they want to bring in a lot of foreign currency 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 inside Thailand than outside.
Due to this reliance on the export of goods and services to foreigners, Thailand has been particularly hard hit by the pandemic. The tourism sector alone brings in tens of billions of dollars in foreign exchange and is one of the main reasons why Thailand had huge current account surpluses before the pandemic. The loss of those entries put a lot of pressure on that particular business model. In 2019, Thailand had a current account surplus of $38 billion. In 2021, with the lockdown on tourism, the current account fell to a deficit of $10 billion.
For Thai policymakers, it was essential to return to their preferred style of export-led growth as soon as possible. That’s why they were pushing things like the reopening of Phuket with such vigor last year. And in fact, the trade balance has always been in 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 surge in the cost of imports of energy and raw materials. What was needed was a recovery in the tourism sector.
And we are now starting to see it, for the first time since the start of the pandemic. 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. For comparison, in September 2021, the balance of services and income was -$4.5 billion. The reduction in this deficit almost certainly reflects a robust recovery in inbound tourism, helped by a weakening baht and the return of international travel. Foreigners are coming to Thailand again and spending their currency on services, such as tourism. The Bank of Thailand reports that 1.3 million foreign tourists arrived in September, up from 12,000 in September 2021. This is the highest number of foreign tourists Thailand has seen since February 2020.
This trend is expected to continue through 2023. As global energy prices moderate next year and more foreign visitors return to Thailand, it seems likely that the type of large current account surpluses to which Thailand has become accustomed will once again become a regular feature of the economy. If the baht remains weak against the dollar for a period of time, it will give a boost to this whole process. Taken together, all of these signs indicate that Thailand’s economy is on track to regain its pre-pandemic trajectory, and September’s current account surplus is likely no accident.