Oil price increase widens trade deficit for Thailand

Oct 22, 2004 02:00 AM

Soaring global energy prices could lead to a fourth-quarter trade deficit of $ 324 mm for Thailand, the highest quarterly deficit since the 1997 economic crisis, according to a local think-tank.
The recent resurgence of the bird flu was taking a strong toll on the poultry industry, potentially resulting in exports in the fourth quarter rising just 0.8 % from the previous quarter, according to Aat Pisanwanich, director of the International Trade Studies Centre at the Thai Chamber of Commerce.

The trade account posted a deficit of $ 282 mm in August, according to the Bank of Thailand, as well as deficits of $ 308 mm and $ 357 mm in March and April. For the first eight months of the year, the trade account is running a deficit of $ 133 mm.
Crude oil imports in August were worth $ 1.26 bn, an increase of 82 % from the same month last year. Oil consumption in the first eight months grew 8 % year-on-year to an average of 1,123,800 bpd, with imported petroleum products reaching 1,019,300 bpd, or 10.8 % higher than the year before.

With crude prices trading above $ 50 per barrel, the impact on the trade account and growth will be considerable. According to the International Trade Studies Centre, each 10 % rise in oil prices will cut growth by 0.5 percentage points.
A 1 % increase in oil prices would cut the trade account by 2.5 %. The centre projects oil prices for 2004 to average $ 40-$ 45 per barrel, potentially rising to under $ 50 through mid-2005.

Dr Aat said imports for 2004 were projected at $ 95.86 bn, up 27.8 % from the year before. Exports, meanwhile, are expected to total $ 96.04 bn, up 19.98 % from last year, resulting in a surplus of just $ 172 mm, well below previous Commerce Ministry trade surplus estimates of between $ 1.5 bn and $ 2 bn.
However, Commerce Minister Watana Muangsook said he was optimistic that the country would run a surplus of at least $ 500 mm-$ 600 mm this year, with fourth-quarter shipments expected to rise strongly and prices rising in several categories, particularly farm products. He noted that white rice prices averaged $ 300 per ton in the third quarter, compared with $ 257 earlier.

Hopes that the United States will reduce anti-dumping tariffs to 5.56 % from 10.25 % now on Thai shrimp later would also help bolster export performance.
"We are confident that exports will meet the 20 % growth target for this year, with a trade surplus for the entire year. Most companies have already imported their capital goods over the past nine months," Mr Watana said.

A survey by the International Trade Studies Centre of 498 exporters showed that rising oil prices would affect exports and profit margins.
Many recommended that with fuel, shipping charges and imported material costs rising, the government should look to ease customs procedures and increase efforts to cut overseas trade barriers to help support growth.

Source: Bangkok Post
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