Price of imported oil worsens Thailand's public accounts
Price of imported oil worsens Thailand's public accounts
Deutsche Presse-Agentur, Bangkok
Thailand is facing its first trade deficit since the 1997 economic crash, mostly because of high imported oil prices, the government said.
Prime Minister Thaksin Shinawatra admitted the country was headed toward a trade deficit this year but insisted the government's current account would continue to register a surplus.
"We believe we will only see a trade deficit this year, so don't be too worried about our balance of payments, which should remain in surplus," Thaksin was quoted as saying by local media on Saturday.
The government revealed earlier this week that February trade data showed a deficit of exports to imports for the second- straight month because of soaring global oil prices and increased shipments of capital goods.
The February trade deficit was estimated at US$525 million with imports at $8.27 billion and exports at $7.74 billion.
Finance Minister Somkid Jatusripitak said the February deficit was driven largely by higher imports of capital goods, machinery, steel and oil.
Steel imports rose 80 percent from January with oil imports up 23 percent year-on-year. Reconstruction efforts from the year-end tsunami has also increased pressure on imports.
"Higher imports are inevitable, given economic expansion," Somkid told the Bangkok Post. "Actually, if not for the high run- up in oil prices, we would not have a deficit, and even so, our services account remained in surplus of around $700 million for February."
For January, the trade deficit was $1.47 billion with imports at $9.17 billion and exports at $7.6 billion. The current account deficit was $942 million in January.
The finance minister said he expected the economy to continue to post a current-account surplus for 2005, thanks in part to a projected recovery in the tourism sector.
Some economists have expressed concern that lagging tourism revenues, coupled with government plans to invest heavily in new infrastructure, could further worsen the trade account.
But the Thaksin administration said its investment plans would be managed over a five-year period and insisted it was committed to maintaining fiscal discipline and holding public debt well under 50 percent of gross domestic product.
Meanwhile, the Thai central bank said it would not raise interest rates in response to the U.S. Federal Reserve's decision to hike its benchmark lending rate by a quarter-percentage point this past week.
Central Bank Governor Pridyathorn Devakula said interest-rate policy would be assessed on the performance of the local economy for the moment, not on external factors.
The bank said it did not expect any flight of foreign capital from Thailand because of the U.S. decision to raise its prime lending rate.