International Trade and Finance of Thailand (Part 1)

International Trade and Finance of Thailand (Part 1)

References พรายพล คุ้มทรัพย์ เศรษฐศาสตร์การเงินระหว่างประเทศ: ทฤษฎีและนโยบาย 2547 บทที่ 10

International Economic Relations • 2 types: • Exchange of goods and services – exports and imports • Investment and loans

Benefits of International • Economic Relations • Specialization, based on comparative advantage • Expand market size • Transfer of knowledge and technology

Benefits of International • Economic Relations Economic growth Income and employment

Costs of International • Economic Relations • Fluctuations in world trade and capital flows • Foreign domination

Costs of International • Economic Relations • Economic and social imbalance among • people with different opportunity, education, and economic status

International Trade and Financial Structure • Foreign trade has increased rapidly (exports and imports as % of GDP)

International Trade and Financial Structure Import structure has hardly changed, mainly capital goods, raw materials, and crude oil

Import Pattern of Thailand

International Trade and Financial Structure • Mostly import from industrial countries (esp. Japan), but declining share • Recently import more from ASEAN and China

Sources of Thailand’s Imports

International Trade and Financial Structure • Diversify exports in type and market • High growth of manufactured • Declining trend in labor-intensive • Increasing trend of hi-tech products

Export Pattern of Thailand

International Trade and Financial Structure • More than half depend on developed countries (largest market in the U.S.), but declining shares • Increasing share of export to ASEAN and China

Markets for Thailand’s Exports

International Trade and Financial Structure • Trade in services: always in surplus due to income from tourism and Thai workers abroad

International Trade and Financial Structure • Foreign Direct Investment (FDI): • Large influx of investment from Japan and NICs in late 1980s • Another wave to buy companies after the 1997 crisis • Insignificant Thai overseas investment

International Capital Flows of Thailand

International Trade and Financial Structure • Portfolio investment: • Fluctuate a lot • Increasing impact on Thai stock market

International Trade and Financial Structure • Foreign loans: • Before the 1997 crisis, government borrowing declined, but the private sector borrowed heavily • Continuous debt repayments after the crisis

Foreign Outstanding Debts of Thailand

International Trade and Financial Structure • Chronic deficits in current account before 1997 • Continuous surpluses in trade and current accounts since 1998 after floating the baht

International Trade and Financial Structure • Before 1997, the balance of payments was always in surplus because of large inflows of foreign investment and loans, leading to accumulation of international reserves

International Trade and Financial Structure • Big drop of reserves from defending the baht in 1997 • After the crisis, large outflows of capital to repay foreign debts, causing deficits in BOP

International Trade and Financial Structure • The baht depreciation greatly helped exports, causing surpluses in current account and BOP • Reserves started to grow again

International Trade and Finance of Thailand (Part 1)