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 Home > About Thailand > Economy > Foreign Trade and Balance of Payments


FOREIGN TRADE AND BALANCE OF PAYMENTS

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In Thailand's open economy, foreign trade accounts for a major portion of the national product. Its importance has grown substantially over the past 20 years as its share in the national income increased from 34 percent in 1961 to 67 percent in 1993. As the economy becomes more open, it is increasingly susceptible to change in world economic conditions.

Exports. During 1988-1992 total value of exports increased at an annual average of 20.3 percent. Total value increased from about 18 percent of the Gross National Product in 1984 to approximately 29.5 percent in 1993.

There have been improvements in the structure of Thai exports value, most notably the diversification of export commodities. The share in total exports held by the country's seven major agricultural products, (rice, tin, rubber, maize, sugar, kenaf and tapioca) declined from about 54 percent in 1978 to 81.0 percent in 1993. An impressive rate of export growth has also occurred for textile and garment, electronic equipment, frozen squid, canned pineapple, fish meal and canned marine products, gems and jewellery.

Thailand's traditional export markets are concentrated in the East Asia region. In 1993, Japan tool up 17.05 percent of total exports and three other countries in the region --- Malaysia (2.8 percent), Hong Kong 95.29 percent), and Singapore (12.07 percent). With the high rate of growth in the East Asia region, as well as the growing economic interdependency between Japan, the newly industrialized countries in Asia and ASEAN, the prospect for future export expansion looks bright.

Imports. Thailand's import bill increased from 242,284 million baht in 1984 to 1,143,000 million baht in 1993. Most of the increase was experienced after 1986 when the country started a period of economic boom. Between 1961 and 1973, the portion of the total Gross National Product spent on imports stood at between 18 and 21 percent. During 1973-1982, the ratio increased to 28 percent as a direct result of substantial rises in the import price of petroleum. In 1993 expenditures on imports accounted for about 36.6 percent of the Gross National Product.

Import structure has changed in recent years. The proportion of consumption goods imports has continually declined from 23.7 percent of total import value in 1967 to only 9.6 percent in 1993 as a result of the government's industrial development policy oriented towards import substitution. At the same time, imports of raw materials and capital goods increased substantially to about 73 percent of total imports by the end of 1993.

Thailand relies on imports from certain major trade partners, particularly Japan and the United States. In 1993 imports from these two countries accounted for 42.3 percent of toe total. Over the period 1978-1988, the proportion of imports from West Germany and the United Kingdom declined from 9.67 percent of the total to about 8.3 percent while imports from Saudi Arabia and Qatar, the major exporters of petroleum, increased substantially. During the period under review there has been no significant change in the direction of imports from ASEAN countries. Imports from Malaysia and Singapore totaled respectively 6 percent and 9 percent of the total in 1993.

Terms of trade. With the continuing increase in fuel prices, world- wide inflation, and the decline of primary product prices in the world market since 1975, the terms of trade have become less favourable. However, there was a significant improvement in 1992/1993 with the sharp rise in primary commodity prices in the world market.

Balance of payments. Thailand's trade deficit has been increasing gradually over the past two and a half decades. Trade deficit of 221,000 million baht was registered during 1993. the main reason for this deterioration was the huge demand for import of raw and semiprocessed materials, and capital goods created by the expanding industrial sector.

At the same time, the world price of many Thai export commodities continued to decline, resulting in a lower growth rate in export earnings. While the trade deficit grew bigger, income from services and foreign capital inflows were insufficient to offset the tremendous gap. Consequently, the balance of payments registered a record deficit of 13,298 million baht in 1978. Since then however, the situation has turned around, thanks to tight fiscal and external debt management, lower oil prices, and substantial increases in capital inflow, exports, and tourism. the balance of payments has registered a surplus since 1984. By the end of 1993, Thailand's official foreign reserves stood at US$ 25,438.8 million, equivalent to about seven months of imports.

If you want to read some interesting topics, select the following information :

Bounty of the Land and Sea | Sector Performance | The Agriculture and Mining Sectors | Major Crops | Livestock | Forestry | Fisheries | Mining | The Manufacturing Sector | Tourism | The Organized Financial Market | The Bank of Thailand | Other Sources of Finance | The Capital Market | The Role of the Public Sector | Infrastructural Support | Public Utilities | Government Incentives and Financial Assistance | Foreign Trade and Balance of Payments | Conclusion


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