Thai Baht: External cushion less generous – UOB

UOB’s Global Economics & Markets Research highlights that Thailand’s external buffers remain credible, but current-account dynamics have turned less favorable. Apr–May deficits reflect strong imports of energy and capital goods alongside resilient exports, reducing domestic value-added. The Baht is seen supported by structural buffers, yet near-term FX performance will stay sensitive to Oil prices, expectations and current-account data.

Current account weakens as imports surge

"On stability, Thailand’s macro buffers remain credible, but the direction of travel has become less favorable. Inflation moved quickly back into positive territory, with headline CPI near 2.8–2.9% y/y in Apr–May and producer price pressures still elevated."

"Externally, the Apr–May current-account deficits reflected a surge in imports, especially from energy, raw materials, intermediate goods, and capital goods, rather than a collapse in exports. Official reserves remain high, but the current account no longer provides the same comfort as it did earlier in the year."

"Third, Thailand’s external position is still resilient, but the current account is no longer providing the same comfort as earlier in the year. The Apr–May current-account deficits are not yet a balance-of-payments concern because reserves remain high and external-debt metrics are manageable."

"Strong exports are being accompanied by strong imports of energy, raw materials, intermediate goods, and capital goods. This reduces the domestic value-added multiplier associated with the export upturn and explains why headline trade strength is not fully translating into household income, SME revenue, or broad manufacturing output."

"For markets, the baht should remain supported by Thailand’s structural external buffers, but near-term FX performance will remain sensitive to oil prices, expectations, and the current-account print."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)