Thailand Has Current Account Surplus as Demand Sinks

By Suttinee Yuvejwattana

Jan. 30 (Bloomberg) -- Thailand had its first current account surplus in six months in December as oil prices fell and demand declined for imported goods. Manufacturing production sank the most ever.

The surplus was $91 million last month compared with a $935 million deficit in November, Amara Sriphayak, a Bank of Thailand official, said today in Bangkok. The median estimate of 14 economists in a Bloomberg survey was for a $100 million surplus.

“In December, we were starting to see that imports of oil and machinery and the like were falling and the domestic economy was slowing,” said Andrew Stotz, head of research at CLSA Ltd. in Bangkok. “We don’t have exports saving us. I think it will be a very, very rough year.”

Thailand and other export-dependent countries are cutting interest rates and boosting spending to buoy domestic consumption as their main markets in the U.S., Japan and Europe contract. Toyota Motor Corp., Seagate Technology Inc. and Charoen Pokphand Foods Pcl are among companies that are cutting jobs or sales forecasts as demand for their goods wanes.

A measure of manufacturing output fell 18.8 percent in December, from a revised 7.7 percent decline a month earlier. The median estimate of 17 economists in a Bloomberg survey was for an 8.2 percent contraction.

Producers Worried

“Producers are still concerned about the worsening global economy, which affect their businesses,” Amara said. “Manufacturing fell in almost all sectors because of a sharp fall in domestic and external demand.”

The baht, little changed at 34.92 per dollar as of 2:52 p.m., is poised for a monthly decline of 0.7 percent. The SET Index of stocks, set for a 2.9 percent retreat this month, added 0.3 percent, paring an earlier gain of as much as 0.6 percent.

Prime Minister Abhisit Vejjajiva, the nation’s third premier in five months, is boosting spending and waiving taxes to spur the economy, which may enter its first recession in a decade this quarter.

The current account comprises the difference between exports and imports of goods, services, investment income and remittances. Trade makes up about 70 percent of the current account, and tourism contributes most of the service industry’s 30 percent component.

Demand Dropping

The trade surplus in December was $496 million, compared with a $896 million shortfall in November, the central bank said.

Exports contracted for a second month, falling 16 percent from a year earlier to $11.5 billion, the central bank said. The decline was 18 percent in November.

Imports fell 8.8 percent to $11 billion in December, compared with 0.2 percent growth a month earlier. Thailand imports almost all of its crude oil, the price of which is 55 percent lower than a year ago.

Tourist arrivals sank 27 percent to 1.1 million in December after an eight-day seizure of Bangkok airports’ by protesters prompted many travelers to cancel airline and hotel bookings.

Business sentiment rebounded from a record low, rising to of 36.9 last month from 34.4 a month earlier. The reading hasn’t exceeded 50, a level that suggests improving sentiment, since April 2004.

Thailand’s gross domestic product may have shrunk 3.5 percent in the last quarter and the contraction may continue until at least the end of April, the Finance Ministry said yesterday. That would put the economy in into its first recession since 1999.

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