Thai Trade Surplus Narrows as Global Oil Price Climbs

By Suttinee Yuvejwattana

July 22 (Bloomberg) -- Thailand's trade surplus narrowed in June as soaring oil prices increased the cost of imports.

The surplus was $628 million, Siripol Yodmuangcharoen, the Commerce Ministry's permanent secretary, said in Bangkok today. The excess was $1.29 billion in May.

Thailand imports most of its oil, the cost of which surged last month, and the government is subsidizing some fuel charges. The Group of Eight nations on June 14 called on emerging markets to cease subsidizing the price of oil, citing the view such support was propelling demand and prices higher.

``Local oil consumption hasn't dropped much despite the rising price,'' said Nuchjarin Panarode, an economist at Capital Nomura Securities Pcl in Bangkok. ``It will take some time for Thais to adjust their consumption behavior.''

Imports rose 30.7 percent to $15.6 billion last month after increasing 15.7 percent in May. Fuel purchases added 66.4 percent, compared with a 4.7 percent gain the previous month. The price of a barrel of oil in New York has climbed 36 percent since December.

``An expected global economic slowdown and high oil prices remain key threats to our export target,'' Siripol said at a press briefing today. ``Agricultural products, especially rice, are the key drivers for our exports.'' He reiterated a 2008 export-growth target of 12.5 percent.

Record Exports

Exports gained 27.4 percent from a year earlier to a record $16.3 billion. They advanced 21.4 percent the previous month. Thailand, the world's biggest exporter of rice, is benefiting as surging commodity prices help offset slower demand from the U.S., the nation's largest single export market.

``Exports have been the main pillar of growth and will continue to be so,'' said Ramya Suryanarayanan, an economist at DBS Bank Ltd. in Singapore. ``Oil prices and, more importantly, the domestic political situation are hurting the recovery in domestic demand.''

The Southeast Asian nation will cut excise taxes for fuel and waive fares for cheap bus and train seats in a six-month program from July 25 to bolster support amid anti-government protests and the fastest inflation in a decade.

Consumer prices rose 8.9 percent last month as higher oil prices increased transportation, food and production costs. Finance Minister Surapong Suebwonglee said July 14 that the nation may fall short of a 6 percent economic growth target this year because of price increases. The economy expanded 4.8 percent in 2007.

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net