Former Deputy Minister of Labour warns that a continuation of the current trend with twin deficits would be bad news for the kingdom. Thailand’s Foreign Currency Reserves dipped again on Friday 21st October with the Bank of Thailand, on Saturday, issuing a statement in which it said it was monitoring volatile movements of the baht carefully. The government led by Prime Minister Prayut Chan ocha and Minister of Finance Arkhom Termpittayapaisith, meanwhile is highlighting the country’s expected growth rate of 3% to 3.5% for 2022, inward investment and rising numbers of foreign tourists returning to the country aided by a lower priced baht.

A former cabinet minister has become the second ministerial official who served in the government of Prayut Chan ocha to raise concerns about Thai economic data as the country battles to attract more foreign tourism income to offset what is now a more pronounced pattern of both a trade deficit due to inflated imports and a deficit in the service sector caused by far lower foreign tourism earnings, which are driving a lower valued baht.

Former Deputy Minister of Labour Dr Narumon Pinyosinwat has said that a new pattern of trade deficits, as well as service deficits, is emerging this year as the country struggles against a current account deficit with consistent service sector deficits and now, since July, a trade sector deficit. The country is losing trillions of baht per annum in lost income since its foreign tourism industry collapsed in 2020 under the weight of government-ordered restrictions and closures.

Former cabinet minister within the government of Prime Minister Prayut Chan ocha, Dr Narumon Pinyosinwat, has raised questions about the country’s economic outlook and data by highlighting a deterioration in the country’s trading account in July and August which saw imports substantially exceed exports.

This was in addition to a consistent pattern this year from January to August with a service deficit caused by the country’s inability to generate the same levels of foreign currency earnings as in the past caused by substantially lower income from foreign tourism.

Former minister Dr Narumon Pinyosinwat highlights both a new negative trend for the economy and an anomaly in current account data between state bodies

48-year-old Dr Narumon Pinyosinwat, an economist who formerly worked with the National Institute of Development Administration (NIDA) before taking up a role in the government of Prayut Chan ocha as a spokesman in July 2019, was elected as a party list MP for the Palang Pracharat Party in that year’s General Election.

She earlier served as Vice Minister for Finance under Apisak Tantivorawong who was the finance minister in General Prayut’s first government under the junta administration serving from 2015 until 2019.

Appointed Deputy Minister of Labour by Prayut in August 2020 as part of a reshuffled cabinet, she was fired by the PM because of her association with a heave against his government in September 2021 led by Captain Thamanat Prompow.

Former minister questions export growth data as Bank of Thailand plans to rein in consumer loans

Over the weekend, Dr Narumon also drew attention to another anomaly concerning economic data currently coming from government agencies when she quantified the current account deficit overall for 2022 as stated by the National Economic and Social Development Council (NESDC), the government’s key economic advisory agency, as being $7.6 billion for the year or ฿266 billion and compared this to an accumulated deficit as published by the Bank of Thailand of ฿1.25 trillion or nearly five times the NESDC figure.

Second time in weeks that a former minister in Prayut’s government has queried economic data

It is the second time in a matter of weeks that a former minister with an economics background in the government of Prayut Chan ocha has queried official economic data following concerns raised the previous week by Dr Kobsak Pootrakool, formerly Vice Minister at the Prime Minister’s Office who worked closely, in his time, with the economics team of Dr Somkid Jatusripitak when in office up to July 2020.

Travel to Thailand rebounding despite inflation and higher fares, now nearly 2 million a month

Last week, Thailand’s Minister of Finance, Arkhom Termpittayapaisith came out to announce that the government had accepted that given rising interest rates in the United States, there would be a weaker Thai baht until at least 2024.

He suggested the kingdom welcomed this development as a boon to its efforts to generate further foreign tourism earnings and export markets.

Thailand earned ฿2.2 trillion in direct foreign tourism earnings or currency exchange in 2019 with an average spend of ฿50,000 per visitor.

This year, because of more short-stay visitors from Asian markets, the spend per capita is expected to fall to ฿45,000 per head with a target of 10 million visitors leaving an income from foreign tourism at ฿450 million or a loss of ฿1.55 million compared with 2019.

Economy now dealing with ‘twin defecits’ warns Dr Narumon as a consistent pattern of deficits in the trade sector emerges along with service deficits

However, in recent days, Dr Narumon Pinyosinwat has warned that the government is now dealing with what she termed ‘twin deficits’ with a trade imbalance and also a negative value when it comes to earnings from the service sector.

She highlighted this as something both new and negative for Thailand’s economic prospects but accepted that this pattern was not uncommon for countries at present with prevailing economic conditions.

In recent weeks, former Vice Minister at the Prime Minister’s Office, Dr Kobsak, urged the government to conserve Thailand’s Foreign Exchange Reserves as a priority going into 2023.

The reserves dipped again on Friday 21st October to $197.8 billion from a peak earlier in 2022 of $259.2 billion recorded at the end of January. 

This technical measurement appears to be higher than other references to the figure as it includes foreign exchange held in gold, special drawing rights and Thailand’s reserve position at the IMF.

Baht still weak due to US monetary policy

The baht continues to trade at more than ฿38 to the US dollar and was quoted at ฿38.37 last Wednesday as policy in the United States continues to be hawkish, pushed by a resilient US economy which continues to surprise markets as the Federal Reserve goes all out to curb US inflation which came in at 8.2% in September, below August’s figure of 8.3% but higher than market expectations.

Dr Narumon, this weekend, urged Thai economic planners to prioritise efforts within the kingdom both to attract more foreign tourists and their foreign currency spending power but also, in the longer term, to foster moves to make Thailand more energy independent by replacing imported energy such as oil.

She also said that the kingdom should be wary of borrowing which is the natural recourse for a government in this situation by funding key infrastructural projects through partnerships with private investment partners rather than deploying public funds.

The US-educated economist noted that Thailand’s 2023 budget provided for a budget deficit of ฿695 billion or 3.88% of GDP.

Bank of Thailand’s Chayawadee Chai-Anant says bank monitoring volatility of the baht on the market very closely, points to foreign asset holdings

On Saturday, Chayawadee Chai-Anant, an assistant governor with the Bank of Thailand briefed reporters on market volatility linked with the Thai baht.

Ms Chayawadee stressed this was being exacerbated by uncertainty in world financial markets driven by the rising value of the US dollar and that the central bank was closely monitoring the situation.

She stressed that, despite the rising value of the dollar at levels not seen since 2006, Thailand still benefited from capital inflows and pointed to $110 billion in assets held by foreign investors up to October 20th last.

She said foreign investors had ploughed ฿146 billion or $3.84 billion into shares on the Thai stock exchange this year although foreigners had sold Thai bonds to the value of $789 million or ฿30 billion.

PM issues upbeat statement on the economy

Despite these assertions, it is felt by some analysts that liquid funds or deposits are flowing to more offshore havens such as the United States where current interest rates for deposits are higher than those on offer in Thailand.

Prayut hails economic progress by his government but his path to reelection next summer is unclear

On Saturday, Prime Minister Prayut Chan ocha, in a statement, highlighted the country’s projected growth of 3% to 3.5% this year and its reopening to foreign tourists and inward investment of ฿30 billion across 323 projects in the opening 7 months of the year as well as a higher tax take in the opening 11 months of the fiscal year, ending on September 30th last.

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Further reading:

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Warning to central bank to preserve Thai foreign exchange reserves for a brewing 2023 economic storm

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