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RPT-UPDATE 2-Thai balance of payments in red as investors worry

Reuters - Tuesday, July 1

By Kittiphong Thaicharoen

BANGKOK, June 30 - Thailand's balance of payments slipped into the red in May for the first time in more than a year, even as the trade balance and current account swung into a surplus.

Analysts said the balance of payments deficit reflected growing unease among investors over emerging markets in the face of global inflation, which is expected to prompt the Bank of Thailand to raise rates in July for the first time in two years.

In Thailand's case, investor concern is also being fuelled by political uncertainty as street protesters laying siege to Government House press for the resignation of the cabinet.

"Thailand reported its first balance of payments deficit since April 2007, reflecting capital outflows by investors concerned about political problems. This should be negative for the baht's outlook," said Usara Wilaipich, an economist at Standard Chartered Bank.

Data on Monday from the Bank of Thailand showed the balance of payments slipped into a $77 million deficit in May from a month-earlier surplus of $1.4 billion.

Thailand's stock market <.SETI> has fallen almost 14 percent since the street protests began because the demonstrators feel the cabinet is a proxy for former Prime Minister Thaksin Shinawatra, who was ousted by a military coup in 2006.

The baht <THB=TH> has fallen more than 4 percent over the same period.

Other figures in the data painted a rosier picture of the economy.

Thailand's trade account showed a healthy surplus in May of $1.27 billion, turning round from $1.77 billion in April, which was the highest deficit in 12 years, the central bank said.

The positive trade figure helped the current account switch to a $631 million surplus from a $1.66 billion deficit in April.

Like other countries, Thailand is feeling the brunt of a record rise in oil prices. However, as a commodity exporter it is also benefiting from a global rise in food prices.

May exports, buoyed by high prices for rice and other commodities, rose 22.1 percent from a year earlier to a record $15.30 billion, up from $13.63 billion in April. The rise was in line with market expectations for a 22.2 percent increase.

Rice exports jumped 128 percent in dollar terms from a year earlier, although they made up only 2 percent of total exports, customs figures released last week by the Commerce Ministry showed.

May imports rose 15.7 percent from a year earlier, the weakest annual growth for any month this year, after a revised 42.1 percent jump in April.

Last week's Commerce Ministry data showed petroleum imports, which account for around 17 percent of total imports, rose just 4.7 percent in May from a year earlier after a rise of 88 percent in April.

Annual private investment growth eased to 5.0 percent in May from 5.4 percent in April, while the annual consumption growth rate fell to 6.3 percent from 7.9 percent.

Thailand's consumer price index for June will be published on Tuesday at 0700 GMT.

The Bank of Thailand, which has held interest rates steady since July 2007, is widely expected to raise rates at its next policy review on July 16.

Analysts polled by Reuters last week expected oil-fuelled inflation to accelerate to a 10-year high of 8.5 percent in June, up from just 1.9 percent a year earlier.

BoT chief economist Amara Sripayak told reporters annual inflation might hit double digits in July and August, but that was partly due to a low comparative base a year ago. (Writing by Vithoon Amorn; editing by Darren Schuettler and Neil Fullick)

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