Thailand is expected to record a trade deficit for the third consecutive year in 2024 due to structural issues

        Thailand experienced a trade deficit for two consecutive years in 2022 and 2023, primarily due to increased energy imports amid rising global energy prices. Meanwhile, Thai exports contracted in 2023. Thailand experienced a continuous trade deficit during 2011-2023, when crude oil prices stayed above USD100 per barrel.
KResearch forecasts that Thailand will post a trade deficit for the third consecutive year in 2024. In the first 7 months of 2024, the country recorded a deficit of USD6,616 million (-23%YoY), due to the following factors:

1.Thailand is a net energy importer, and its trade deficit will increase by approximately USD4 billion for every USD10 per barrel rise in global crude oil prices. In 2024, Thailand will continue to experience a trade deficit due to persistently high energy prices, although they have declined from the levels seen in 2022 when the Russia-Ukraine conflict began.
2. Thailand’s competitiveness is declining. When considering the top 10 products with the largest trade balance in 2023, several important products are found to show a trend of decreasing trade surplus due to:

• Demand for Thai products in the global market has decreased due to changing technology. For instance, hard disk drives will be replaced by solid state drives (SSD), for which Thailand is not a production base. In addition, the demand for combustion engines, for which Thailand is a production base, has also decreased, while the market demand for electric and hybrid vehicles is increasing.
• Competition is increasing. Thailand exports products with low value and complexity such as agricultural products like rice, durian and rubber, which are facing price competition and improvements in product quality from other countries that are competing for market share.

3. The trend of global trade has changed since the trade war started in 2018

• Thailand is likely to register a widening trade deficit with China due to increased imports of machinery and capital goods, coupled with increased imports of affordable consumer goods from China, such as electrical appliances and miscellaneous goods. Meanwhile, exports of intermediate goods to China, such as plastic pellets and chemicals, have decreased, as these can be produced domestically due to cost advantages (economy of scale). In addition, agricultural products, which account for a large proportion of Thailand’s exports to China, such as durian, are experiencing extreme weather.
• The trade surplus with the US has tended to increase, but it cannot offset  the trade deficit with China. Thailand is benefiting from the relocation of production bases out of China but is at risk from anti-dumping or countervailing (AD/CVD) measures on goods such as solar cells and tires. This puts pressure on Thai exports to the US, while attracting investment in new technology industries in Thailand remains limited.
• In addition, the trade surplus with other major trading partners has tended to slow down due to the increasing market penetration of Chinese products in Thailand’s trading partners, such as ASEAN countries and Australia, as well as Thailand’s increasing imports from ASEAN countries, such as Vietnam, which is an increasingly important production base.

        
        In summary, Thailand’s trade deficit is likely to persist due to its import structure, which heavily relies on high-value energy and capital goods, along with the influx of low-priced Chinese-made products into the domestic market.
        However, Thailand can reduce its trade deficit by increasing the use of electric or hybrid vehicles and increasing the proportion of clean energy in the country; all of which will help reduce Thailand’s energy imports.

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