Despite the return of growth in Thailand’s export sector with encouraging news this week reported for April, the country has run on a negative current account balance since November 2020 as the essential nature of the foreign tourism industry to the Thai economy has made itself quite clear. The Thai government now finds itself battling on all fronts with a virus outbreak that saw a record number of deaths announced on Tuesday, to a vaccine rollout with nervousness over the availability of enough doses to a tightening budgetary situation which has seen a ฿500 billion loan facility rushed through in the last week by executive decree.

A former Finance Minister is taking the government to court over a ฿500 billion loan facility quickly authorised this week by decree. It comes as top economist with Kasikorn Bank, Kobsidthi Silpachai, is predicting that even though the baht has weakened since the beginning of the year with Thailand running a negative current account balance since November 2020, the kingdom and the baht will rebound towards the latter half of the year with a successful vaccine rollout and a return, in the last quarter, of mass foreign tourism and the financial earnings it brings with it. He predicts the baht to once again break through the ฿30 to the dollar barrier towards the end of the year.

The Head of Capital Markets Research at Kasikorn Bank, Kobsidthi Silpachai (bottom left) is predicting a rebound for the baht towards the end of the year and the return of Thailand’s foreign tourism industry. It comes as a former Finance Minister, Thirachai Phuvanatnaranubala (top left), has filed a petition at the Administrative Court in Bangkok seeking a review of the government’s executive decree borrowing ฿500 billion, the product of a secretive cabinet meeting on May 18th last and which is already in effect. The money is needed to deal with the economic emergency.

The Thai government is facing legal action in the Administrative Court over its expedited move, since last week, to borrow ฿500 billion to be used by the kingdom to prime the economy and fund business recovery efforts, particularly in the decimated tourism sector. It will also pay for public healthcare including vaccines and medicines.

A secretive cabinet meeting on Tuesday, May 18th approved a ฿700 billion measure in addition to the ฿1 trillion already approved last year.

However, it is understood the Thai King signed the measure for ฿500 billion last Thursday and it was later published in the Royal Gazette on Tuesday coming into effect immediately.

Rushed borrowing measure takes the form of an executive decree and has already come into effect

The measure take the form of an executive decree which authorises the government to issue bonds and borrow money on both local and foreign markets.

Only 6% of the amount borrowed or ฿30 billion is earmarked for by the Public Health service to be spent on equipment, the upgrade of facilities, medicines and vaccines.

฿300 billion will go into direct aid to the public and business while ฿170 billion will go into helping the commercial sector retain employment and a range of initiatives currently being pursued through the Finance Ministry and other economic agencies.

Ex minister seeks review of government’s actions

On Monday, a former Minister of Finance, 69-year-old Mr Thirachai Phuvanatnaranubala who served in the government of Yingluck Shinawatra from August 2011 to January 2012, lodged a petition at the Administrative Court in Bangkok seeking to have the cabinet resolution which approved the measures on Tuesday, May 18th reviewed by the court.

Mr Thirachai is challenging the constitutionality of the measure. 

The former senior minister and Secretary-general of the Securities and Exchange Commission said no officials in the public service had been able to offer an explanation of why the borrowing initiative had been approached in such an unorthodox way with no notice given that the cabinet was even considering such a course of action.

Concerned also at the management of the ฿1 trillion loan approved last year to fight the pandemic and for correct financial discipline and procedures

The former finance minister also expressed concern at the management of the ฿1 trillion loan facility approved last year by the government to fund its response to the pandemic.

He said, in the past, a notice of such measures had been given in advance so that they could be properly scrutinised. He referred to the provisions of the State Fiscal and Financial Disciplines Act of 2018.

The 2018 law established the State Fiscal and Financial Policy Commission headed by the Prime Minister and the Finance Minister and served by the Fiscal Policy Office. It also laid down requirements for the government to adhere to strict financial discipline including planning regarding budgetary measures and expenditure.

The act was established to reinforce financial discipline as a key public policy goal within the kingdom and set down a framework for how public funds, budgets and disbursements should be managed.

Exports for April were up by 13.09%

The Ministry of Commerce, on Monday, had more upbeat news when it reported a strong 13.09% gain in exports for April.

Phusit Ratanakul Sereroengrit, an official at the ministry, highlighted an impressive 21.9% rise in exports to China which in April became Thailand’s largest market for goods. Exports of auto car parts, electronics, rubber and oil were buoyant.

‘Exports expanded sharply in most key markets,’ he disclosed.

The month saw a 9% gain in exports to the United States while the European Union’s economy came roaring to life and rewarded Thailand with a bumper 52.5% rise in exports.

Trend for exports is positive but capital has been leaving Thailand since the end of last year

The Minister of Commerce, Jurin Laksanawisit, predicted the trend would keep improving as the year moved forward and noted that the exports figure for April 2021 was 29.79% ahead of this time last year which, of course, was a disastrous period for the economy with the country at the outset of the pandemic and the beginning of a severe lockdown.

The minister highlighted a $182 million trade surplus in April but this was down from a $700 million figure achieved in March when the kingdom also recorded a substantial negative current account balance as capital and earnings have flowed out of the kingdom since late last year. 

Exporters confident of 5 to 7% growth for 2021 as minister highlights the importance of this engine of economic growth right now for the country

The figures showed a more moderate 4.78% growth in the first four months from January to April 2021 although exporters are predicting that a 5 to 7% gain for 2021 is quite possible at this time, up from the 4% targeted at the outset of the year.

Indeed the biggest impediment right now for exporters is finding enough freight containers and the required staff to load the cargo ships sending goods and produce out of Thailand.

Key engine that drives the Thai economy as officials move to protect factory workers in the sector

‘Exports are an important engine to drive the Thai economy in addition to domestic consumption, while the tourism sector remains trapped by the pandemic,’ said the minister.

Over the weekend, the Minister of Labour Suchart Chomklin announced moves to vaccinate staff and workers in key manufacturing provinces as a priority in June and July to protect the kingdom’s main engine of growth going forward.

Fears for the key manufacturing sector in 9 provinces with the Indian variant having been detected within a Bangkok building site with dozens of cases confirmed

There is a fear that the current outbreak, which is still raging with a record level of deaths announced on Tuesday, may reach into work settings and undermine the kingdom’s industrial base in eastern provinces and those adjacent to Bangkok which feeds the export trade.

Kasikorn Bank economist predicts that the strong Thai baht will be back at the end of 2021

Meanwhile, Kasikorn Bank sees the dollar to the baht exchange rate as responding to the government’s progress on the vaccination of the population even as the baht has weakened since the end of last year with the continued absence of foreign tourism and the income that it brings into the country.

Mr Kobsidthi Silpachai of Kasikorn Bank Capital Markets said the Thai baht will continue to be weak until the end of June.

However, he sees the baht strengthening against the dollar towards the end of the year and again breaching the ฿30 to the dollar barrier at the end of 2021 at between ฿29.70 to ฿29.80 to the greenback.

Negative account balances since November prompted an emphasis on reopening to foreign tourism

Thailand, while it has seen rising exports, has also seen a weakening position of its current account surplus falling from $38.2 billion in December 2019 to $3.9 billion in March.

The kingdom has been reporting negative current account balances since November 2020, a situation that has led the government to prioritise the reopening of the kingdom to foreign tourism.

The figure was a deficit of $1,294 million that month with a deficit of $828.94 million in December. For January 2021 it was $673.34 million in the red, $1,071.44 million in February 2021 and $806.16 million at the end of March.

The figure for the current account balance is the mirror opposite of the kingdom’s capital account and includes financial transfers and remittances in either direction.

Bank predicting a strong return of foreign tourism

The bank is predicting a rebound for the baht if the country’s reopening plan for July 1st in Phuket goes ahead followed by 9 other foreign tourist destinations from October 1st and large numbers of foreign tourists are seen again by the end of 2021.

Phuket still to reopen by July 1st but key economic agency predicts a 99% wipeout in tourist arrivals

This prospect was played down last week by the National Economic and Social Development Council (NESDC) which only projected 500,000 visitors for 2021.

However, there are reports from sources within the tourism industry that there is interest among European, American and Australian holidaymakers in returning to Thailand at the end of this year once the position becomes clear.

This is still difficult to predict as uncertainty reigns over the success or failure of the vaccine rollout due to commence on an industrial level on June 7th next as the Thai government juggles many balls at the same time to bring the kingdoms safely through this testing pandemic crisis.

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Further reading:

Economic picture continues to darken as cabinet approves new ฿700 billion loan to plug the gap of higher deficits

Thailand facing a credit crunch as 3rd virus wave craters the kingdom’s economic recovery plans

3rd virus wave now spells not just economic loss but financial danger as kingdom’s debt level rises

Still time to avoid lockdown says Health Minister as 3rd virus wave dwarfs all infections to date

Thai economy is still in reverse despite rising confidence and a virus threatening a 3rd wave

Reopening of Phuket still not officially approved although it is the ideal test for a broader move

Minister urged not to be afraid to borrow in 2021 as fears grow for a quick foreign tourism revival

Economy to rebound as the year progresses driven by exports and a return of mass foreign tourism

Door closing on quick foreign tourism return as economic recovery is delayed to the end of 2022

Phuket’s plan to self vaccinate on hold as Interior Ministry orders private sector out of vaccine deals

Refloat of foreign tourism in the 2nd half of 2021 with vaccines pushed by minister and industry for the sector

Fact – only 6,556 visitors arrived in Thailand last month compared to 3.95 million in December 2019

Desperate foreign tourism business concerns are clinging to straws as they try to survive the crisis

Finance Minister says economy must pivot away from tourism with a switch to S-Curve industries

Steady as she goes economy driven by exports and public investment with a 3.3% growth rate forecast for 2021

Thailand’s tourism boss targets thousands instead of millions as public health is prioritised above all

Thailand unlikely to reopen doors to mass-market tourism before the end of 2021 until after a full vaccination

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