Photographer: Taylor Weidman/Bloomberg

Thailand's Winning Mix: Tourism, Leicester City and Cheap Oil

When it comes to hefty trade surpluses, the likes of China, Japan, Germany and South Korea make the list of usual suspects.

But without much fanfare, Thailand — best known for its beaches, food, military coups and more recently, the football heroes Leicester City — has run up the biggest current-account surplus among major emerging markets.


The current-account surplus in the first quarter ballooned to an annualized 10.2 percent of gross domestic product, an improvement that Richard Iley, chief economist for Asia at BNP Paribas, describes as "phenomenal."

Much of the buffer is down to a steep fall in oil prices — Thailand relies on crude imports for more than 80 percent of its energy needs — and a surge in tourism fueled by Chinese shoppers. The nation attracted 7.9 million visitors from China last year, a 70 percent increase from 2014. 

Thailand has been using the windfall to replenish its foreign-exchange reserves by about $20 billion this year, providing a key bulwark if it faces a sudden surge in capital outflows or foreign-exchange market volatility. The increase in reserves has been the fastest of any other emerging market, according to BNP.

"This is not only one of the largest short-run spikes in Thailand’s reserves in the last 20 years but, like the current account itself, leaves Thailand an outlier in the broader emerging market universe."

It's not all good news though. The current-account data also reflects a reluctance by companies and households to spend the dividend from cheaper energy, indicating a deeper malaise in the economy. Thailand remains under military rule two years after a coup and political uncertainty has eroded confidence.

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Savings rates soared to 33 percent of GDP in the first quarter, while investment has slid, according to BNP.

"This unsavory pincer movement is a private-sector phenomenon with depressed animal spirits leaving corporations unwilling to expand investment and households to increase spending, despite the boost to real incomes produced by lower commodity prices," said Iley.

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