Thailand Trade News

April deficit highest since 2005 as oil prices bite
source: Bkk Post May 31 2008

Soaring oil prices took a toll on private investment and the country's trade accounts in April, according to data released by the Bank of Thailand. But rising farm commodities prices helped support household consumption, according to Amara Sriphayak, senior director for the central bank's domestic economy department.
Thailand posted a $1.8-billion trade deficit in April, the largest since June 2005, due largely to high imports at a time of soaring oil prices. Imports were worth $15.39 billion in April, up 41.5% from the year before, against exports of $13.63 billion, up 27.7%. Oil imports alone rose 80% in April in value. The current account deficit widened to $1.66 billion for April, compared with a surplus of $342 million the previous month, due to foreign investor repatriations.
''The central bank is concerned about the deterioration in terms of trade due to oil imports. It is notable that oil imports increased even though prices were higher,'' Dr Amara said.

''While higher farm prices could support exports in the future, they will not balance the higher cost of oil.''
Private investment dropped 0.6% in April from the previous month, compared with a 1.4% monthly decline in March.
Cement sales and imports of capital goods both slowed, while business confidence was down overall in April from the previous month. The central bank's business sentiment index fell to 43 points in April from 47, indicating greater pessimism about prospects going forward, largely due to concerns about higher production costs linked to the rise in oil prices. Farm income, however, rose by a healthy 26% year-on-year in April, helping shore up household consumption figures. Value-added tax revenues and motorcycle and commercial vehicle sales continued to remain high, although passenger car sales declined in April from the first quarter. Car sales were brisk in the first quarter as manufacturers released E20 gasohol-compatible models. Manufacturing in April remained on par with the previous month, with activity led by export-oriented industries, particularly hard-disk drives. Manufacturing for the local market also remained stable. Dr Amara said tourist arrivals in April were on par with the first quarter, although transits through the southern border increased. The hotel occupancy rate in April was 56%, down from the previous month due to an increase in available rooms.

STATE OF THE ECONOMY
Inflation at 10-year high
source: The Nation, Agencies June 3, 2008 May rate of 7.6 per cent forces BOT to revise its forecasts Thailand's inflation rate soared to 7.6 per cent in May, the highest in nearly a decade, due to the unrelenting rise of oil prices. According to the Commerce Ministry, May inflation was the highest since August 1998, prompting the Bank of Thailand to announce it would revise its economic growth and inflation rate forecast for the year.

"The BOT will revise its forecast of economic indicators again as oil prices now have already surged higher than the worst-case scenario," BOT senior director Amara Sriphayak said. The central bank forecast for GDP growth in 2008 is currently 4.8 to 6 per cent. The central bank also forecast headline and core inflation for this year at 4-5 per cent, and 1.5-2.5 per cent, respectively. Amara said the inflation rate is a cause for concern as oil prices are rising continually. Currently, however, the central bank considers an equal risk between growth and inflation. "Higher inflation and the rising cost of living because of oil prices makes people more cautious about spending money," Bloomberg quoted Kasikornbank president Prasarn Trairatvorakul as saying. Consumer confidence, which fell for the first time in six months in April, may decline further in coming months as oil prices increase, said Thanavath Phonvichai, an economist at the University of Thai Chamber of Commerce. According to Bloomberg, Indonesia's consumer prices rose 10.4 per cent in May from a year ago, while India's inflation has accelerated to its fastest pace in more than three and a half years. The Thai government also asked four refineries controlled by state-owned PTT to cut diesel prices for six months to ease inflation. "The ministry will look at all products to see what we can do to reduce the public's burden," Bloomberg quoted Commerce Ministry permanent secretary Siripol Yodmuangcharoen as saying.
The inflation rate in Thailand, Southeast Asia's second-largest economy, may be as high as 5.8 per cent this year, up from 2.3 per cent in 2007.

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