The Bank of Thailand revealed that the current account deficit in May decreased.

The Bank of Thailand reported that the Thai economy remained stable in May 69, noting a narrowing of the current account deficit due to a drop in oil imports and an improved trade balance. Foreign capital is repatriating dividend payments. The Bank of Thailand is also monitoring new technology-focused factories, fearing long-term pressure on the labor market.

June 30, 2569 – Ms. Pranee Sutthisri, Senior Director, Macroeconomic Department, Bank of Thailand (BOT). The press briefing on the economic and financial situation in May stated that the overall Thai economy in May remained relatively stable compared to the previous month, despite continuing to be affected for the second consecutive month by the conflict in the Middle East. However, positive signs of easing were beginning to appear, as evidenced by the average decrease in global crude oil prices. Meanwhile, economic indicators on both demand and supply showed mixed signals.

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The current account deficit narrowed in line with the trade balance.

The current account deficit in May narrowed to US$6.4 billion, compared to US$7.8 billion in the previous month. This was primarily due to an improvement in the trade balance, which saw its deficit decrease to US$2.6 billion from US$6.8 billion in the previous month.

While the energy balance deficit narrowed, resulting from a decrease in crude oil imports after significant domestic imports in the previous month, imports of intermediate goods slowed down, with a decrease in imports of electronic components and electrical appliances.

"The current account balance this month should have improved more, if it weren't for the seasonal negative factor of $3.8 billion in repatriation of profits and dividends by foreign businesses, which typically peaks in May every year."

The Bank of Thailand expects the current account balance to gradually improve as the profit-return season has passed, coupled with a expected slowdown in oil imports. This will be significantly supported by the high season for tourism towards the end of the year. As a result, the overall current account balance for the year is projected to be close to equilibrium or possibly only slightly negative.

Overview of the Thai economy

Ms. Pranee further stated that, regarding other economic activities in May, the tourism sector expanded, with revenue and the number of foreign tourists increasing to 2.3 million, a 7.5% increase from the previous month. This was led by Malaysian tourists, up 40%, and Chinese tourists, up 6%, due to the benefits of the long holiday period. Long-haul tourist groups also recovered as flights resumed following the improvement in the situation in the Middle East. However, short-haul tourists from other ASEAN countries decreased due to the cancellation of some low-cost flight routes and higher living costs.

While private consumption and investment improved slightly, primarily driven by sales and investment in the vehicle sector, especially electric vehicles (EVs), as consumers adjusted to high domestic oil prices, consumption of non-durable goods and services remained relatively stable. Overall, the consumer confidence index continued to decline due to concerns about the cost of living and future employment.

Exports and industrial production slowed down. The value of merchandise exports (excluding gold) decreased, particularly in categories such as hard disk drives (HDDs), electronic components, and jewelry, which declined due to lower exports to the Middle East and India's import restrictions. As a result, the Manufacturing Production Index (MPI) decreased slightly by 0.3%, especially in the production of pickup trucks and electronic circuit boards.

The heat wave has boosted air conditioner exports, but not by much.

Ms. Pranee further stated that the climate crisis and heat waves, particularly in Europe, have significantly driven up the global demand for electrical appliances, especially air conditioners and their components.

The Thai air conditioning industry, the world's second-largest producer of air conditioners, has benefited from accelerated demand in key export markets such as the United States, Europe, and Asia to cope with extremely hot weather. However, due to the lack of policies promoting air conditioner installation in other countries, the increase in demand has not been very high.

Government spending expanded primarily due to central government expenditure, both current and capital expenditures (according to the 2568 economic stimulus budget). While state-owned enterprise capital expenditures contracted, disbursements remained higher than planned.

The overall inflation rate was 2.79%, slowing slightly due to lower global energy prices, but domestic prices remained high due to contributions to the Oil Fund. Meanwhile, core inflation increased slightly to 0.9%, driven by the gradual pass-through of costs for processed food.

The employment situation and the "risk of unemployment".

Ms. Pranee revealed regarding the labor market that the overall employment situation remains stable. In May, overall employment in the market remained at a stable level, reflected in the number of insured persons under Section 33 of the social security system, which did not change significantly from the previous month. However, monitoring of other indicators and surrounding data shows that some industries that have been continuously affected, such as the hotel and transportation sectors, have begun to see a decrease in the number of employed persons.

The Bank of Thailand's monitoring of factory openings and closures reveals a significant trend: most newly opened factories are choosing to invest more in technology, machinery, and automation systems, rather than relying on traditional human labor. The Bank of Thailand assesses this factor as a structural pressure on the Thai labor market in the coming period.

"Regarding the risks to employment from the use of technology, we don't expect sudden layoffs. The introduction of automation and technology in Thailand has been gradual over some period. Therefore, the Bank of Thailand does not anticipate a sudden and alarming mass layoff."

However, from an economic perspective, increased adoption of automation will boost the country's productivity. The key focus now is on accelerating the upskilling/reskilling of existing workers so they can effectively integrate and apply new technologies. This will ultimately increase productivity and generate higher incomes for workers in the long run.

Ms. Pranee further stated that key issues to monitor in the coming period include the impact of rising living costs and expenses, which could affect household purchasing power and increase the cost burden on businesses.

While geopolitical issues and US trade policy remain uncertain, the duration of international conflicts and the direction of global trade policy, which may affect exports and supply chains, need to be monitored.

In Thailand, it is necessary to monitor the effectiveness of government measures, including the efficiency and continuity of budget disbursement and the implementation of various government economic stimulus measures.

Furthermore, there are developments in the El Niño situation, which affect climate conditions that may impact agricultural production and income, as well as agricultural commodity prices.