Oil Imports Lead To Trade Deficit

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BOT now predicts full-year trade deficit

Published on Jul 31, 2004

The Bank of Thailand yesterday predicted the country

would log a trade deficit this year after recording a

disappointing US$54-million (Bt2.23-billion) trade surplus

in the first half.

High oil prices are the biggest single factor that

could bring on a trade deficit this year because most of the

country's fuel is imported, said Amara Sriphayak, the bank's

Monetary Policy Department director. That is despite

expectations that exports in the second half will grow.

In June alone, crude oil imports jumped 132.2 per cent

from June 2003 to $921 million.

The growth pace of imports has been higher than export

growth since last year, and the central bank expects the gap

to widen further. In the first half, imports grew 31.3 per

cent, compared to exports, which increased 22.5 per cent.

In the first six months, raw material imports

increased 29.5 per cent from the same period last year,

while imports of capital goods grew 27.6 per cent. Exports

from the agricultural and hi-tech sectors also increased by

28.2 per cent and 28.3 per cent over the same period,

respectively.

The average price of imports grew 11.7 per cent in the

first half from last year's first six months, and import

volume rose 17.5 per cent. In contrast, the average price of

imports grew 16.9 per cent, while volume grew 4.7 per cent.

"From now on, the value of exports and imports are

likely to continue growing. This will make the value of

exports and imports at par with one another. The trade

balance may be a surplus, or it could also be a deficit,"

she said.

Earlier, the Bank of Thailand had predicted that the

trade balance could be either a surplus of $1 billion or a

deficit of the same amount.

"If the government introduces energy-saving measures,

the value of oil imports would be lower," Amara said.

However, she insisted that the current account this

year would be in surplus due mainly to an expected surplus

of service and balance transfers of $2.7 billion. Income

from tourism is expected to rise 9.2 per cent from last

year.

In addition, private consumption growth has started

slowing. In June, the private consumption index grew only

3.4 per cent due mainly to lower confidence among consumers

and businesses as a result of the unrest in the South and

higher oil prices. In the first half, the index grew 3.9 per

cent over the same period last year.

The business sentiment index in June was 49.7, lower

than 50 |for the second month in a |row, reflecting the

belief among businesses that the environment has still not

improved. However, the index forecast over the next three

months was 53.1, indicating industry expects the business

environment in the near future to improve.Still, private

investment growth has not let up. In the first half, it grew

18.3 per cent year-on-year.

"Though consumption growth has been slowing down,

economic growth is still on an upturn," Amara said.

Anoma Srisukkasem

THE NATION