Services deficit likely to widen
If a dual deficit persists for 3-5 years, referring to the fiscal balance and current account, it could weaken the forces underpinning Thailand's economic growth and reduce the economy's momentum, warns an economist from Thailand Development Research Institute (TDRI).Nonarit Bisonyabut, a research fellow at TDRI, said Thailand's economic strength has traditionally been rooted in its current account surplus, which brought foreign capital into the country and helped support economic activity. The government maintained budget deficits during this period, providing an additional source of stimulus by injecting funds into the economy.
"A dual deficit means these two sources of economic support become less effective or cease to function adequately. Foreign capital inflows decline, while government borrowing becomes more difficult as fiscal risks increase," he said.
"If we play this out into the future, it is a worrying development."
Historically Thailand has enjoyed a trade surplus. While the nation continues to run a trade surplus with the US, it is recording an even larger trade deficit with China.
