BANGKOK: Thailand is being warned that its economic challenge is no longer only about whether growth will recover in the second half of the year, but whether the country can reform fast enough before today’s structural risks turn into a deeper crisis.
The warning came as economists and business leaders point to a shift in Thailand’s long-standing economic strengths.
For years, the country benefitted from large current account surpluses, supported by exports and tourism.
That position is now weakening as energy costs remain high, imports rise, competitiveness declines and the country struggles to build new sources of income from future industries.
Dr Pipat Luengnaruemitchai, chief economist at KKP Research, Kiatnakin Phatra Financial Group, said Thailand was entering a major structural turning point.
The current account, once a key source of stability, is now moving towards a smaller surplus and may fall into deficit.
He said the change could have direct consequences for the baht, monetary policy stability and foreign investor confidence.
If the trend continues, Thailand may need to place greater weight on financial stability when setting both monetary and fiscal policy, particularly if the country becomes more dependent on foreign savings.
Thailand previously recorded current account surpluses of around 8% to 10% of gross domestic product (GDP) during 2014 to 2018, driven largely by the boom in Chinese tourist arrivals.
That helped strengthen the baht and allowed the Bank of Thailand to build foreign reserves rapidly.
Since the Covid-19 crisis, however, the surplus has continued to shrink. One major factor has been higher oil prices, particularly as conflict in the Middle East has pushed up energy costs.
Customs Department figures showed Thailand posted a trade deficit of around US$10bil in April, of which about US$2.4bil came from oil.
KKP said the oil factor as temporary, provided global energy prices return to normal.
The deeper concern lies in the non-oil trade balance. Over the past six months, imports have continued to rise as Thai-made products face tougher competition.
Electric vehicles and several other imported goods have increasingly replaced domestic production in some industries, while some types of investment also carry high import content.
Data centres, for example, can involve imported content of as much as 80% of investment value, adding further pressure to the external balance, although the scale remains limited for now.
The services balance has also failed to return to its previous strength.
Tourism has recovered to about two-thirds or three-quarters of its pre-lockdown level, but the services account has not moved back into a strong surplus because Thailand is paying more abroad for other services, including higher transport costs and intellectual property payments.
The KKP chief economist said a small current account deficit would not immediately signal a crisis, especially as Thailand still has strong buffers.
However, he warned that if the external position keeps weakening, policymakers will have less room to act freely than in the past.
The country will need to be more cautious about policies that could undermine fundamentals, because investors will watch for signs of a “twin deficit” in both the fiscal balance and the current account.
“Given the trend of a smaller current account surplus, and possible small deficits in some periods, this is one issue that policymakers must handle carefully in the next phase, whether in monetary or fiscal policy,” he said.
KKP expects Thailand’s current account to record a deficit of about 2% of GDP in the second quarter of 2026.
Pipat said this level would not yet point to an immediate stability crisis, but it would mark an important signal that the country’s financial position is becoming more vulnerable. — The Nation/ANN
