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🇹🇭 Thailand /Economy & Trade

Economist warns of Thailand's potential dual deficit

From Bangkok Post · () English

Translated from English, summarized and contextualized by DistantNews.

At a glance

News Named sources Context piece
  • An economist warns Thailand faces a potential dual deficit, with both fiscal and current accounts moving into deficit, threatening economic stability.
  • Weaker exports, softer tourism, and rising imports have contributed to a record trade deficit, shifting Thailand from its traditional current account surplus.
  • While one former minister downplays immediate concern, the widening fiscal deficit raises public debt burdens and limits policy flexibility.

Thailand's economic stability is under scrutiny as an economist warns of a potential "dual deficit" scenario, where both the fiscal balance and current account could move into deficit simultaneously. This situation, driven by weakening exports, softer tourism earnings, and rising imports, challenges the country's long-held reputation for external balance.

Pipat Luengnaruemitchai, chief economist at Kiatnakin Phatra Financial Group, highlighted these concerns, noting that a widening fiscal deficit alongside a deteriorating current account could increase financial market volatility, pressure the Thai baht, and limit policy flexibility. The nation recorded a significant trade deficit of $10 billion in April alone, with imports surging 45% year-on-year. For the first four months of the year, the cumulative trade deficit reached $19.5 billion.

We are then forced to change our behaviour because imported goods become more expensive.

— Thirachai PhuvanatnaranubalaExplaining how a weaker baht would naturally correct the current account deficit.

This shift is notable for an economy historically supported by a persistent current account surplus. While tourism has largely recovered, the services surplus is weaker than pre-pandemic levels, and increased shipping costs have raised payments to foreign service providers. Combined with expansionary government policies contributing to fiscal deficits, these trends are raising concerns about investor confidence, capital flows, and the baht's long-term outlook.

However, former finance minister Thirachai Phuvanatnaranubala suggests the dual deficit is not yet a major cause for alarm. He explained that a weaker baht, a likely consequence of a current account deficit, would naturally curb import demand by making goods more expensive. His primary concern lies with the fiscal deficit, as government spending directly increases public debt. He questioned whether this borrowing is matched by a corresponding increase in the nation's economic capacity.

We need to ask whether the increase in borrowing is accompanied by a corresponding increase in our capacity to re

— Thirachai PhuvanatnaranubalaExpressing concern over the fiscal deficit and its impact on public debt.
DistantNews Editorial

Originally published by Bangkok Post in English. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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