Thailand's Current Account Surplus Masks Brewing Risks—Here's Where to Invest Now

Thailand's economy is at a crossroads. Despite a strong current account surplus in Q1 2025—bolstered by robust exports and slowing import growth—projections warn of a potential deficit by year-end 2025. This shift poses both risks and opportunities for investors. Let's dissect the trade dynamics, energy cost pressures, and policy responses shaping Thailand's economic trajectory, and identify sectors poised to thrive or falter.

The Surplus Conundrum: Strengths and Weaknesses

Thailand's Q1 2025 current account surplus averaged $3.5 billion monthly, up sharply from $0.9 billion in early 2024. Exports of goods and services surged 12.3% year-on-year, driven by automotive parts (up 18%), electronics (17%), and agricultural products (14%). Meanwhile, imports grew just 2.1%, reflecting weak domestic demand and high household debt. This trade dynamism has created a virtuous cycle: strong export revenue fuels foreign exchange reserves, currently at $210.8 billion, and supports the baht.

But look closer. The surplus is narrowing due to rising deficits in services and income accounts. For example, net income outflows (e.g., repatriated profits from foreign firms) hit $1.1 billion in March 2025, up from $0.9 billion a year earlier. If exports slow—and projections suggest a moderation in 2026—these deficits could tip Thailand into deficit territory by end-2025.

Energy Costs: A Silent Threat to Trade Balance

Thailand's energy import bill remains a vulnerability. While crude oil prices are currently subdued, geopolitical risks (e.g., Middle East tensions) or supply disruptions could reignite inflation. The country relies on imports for 98% of its crude oil, and energy costs account for 12% of total imports. A spike here would squeeze the trade surplus.

Investors should monitor energy-intensive sectors like petrochemicals and transportation. Companies with hedging strategies or exposure to renewable energy—such as solar or EV batteries—could outperform. For instance, Banpu Public Company (BAF: Thai), a diversified energy firm, has shifted 20% of its portfolio to renewables, positioning it to capitalize on energy cost volatility.

Policy Responses: Fiscal Prudence vs. Growth Priorities

The Thai government faces a dilemma. To sustain growth, it must balance fiscal spending (e.g., infrastructure projects) with deficit management. The 2025 budget allocates THB 4.6 trillion ($119 billion) to public investment, targeting tourism and digital infrastructure. However, if exports falter, this spending could strain public finances.

The Bank of Thailand (BoT) has kept rates steady at 1.75% since April 2024, prioritizing stability over aggressive stimulus. This cautious stance may deter capital outflows but risks stifling private investment. Investors should favor sectors insulated from interest rate sensitivity, such as consumer staples and healthcare, which benefit from Thailand's aging population.

Where to Invest Now: Riding the Transition

1. Export Powerhouses with Diversification:
   Companies like TACC (TACC: Thai), a leading automotive parts exporter, are expanding into Southeast Asia to reduce reliance on China. Their Q1 2025 revenue rose 19% despite slowing global demand.

2. Renewable Energy Plays:
   B.Grimm Power (BGRIM: Thai), investing in solar and wind projects, could mitigate energy cost risks. Its 2024 renewable capacity grew 35%, aligning with Thailand's goal of 50% renewable energy by 2037.

3. Domestic Demand Anchors:
   CPALL (CPALL: Thai), the retail giant dominating Thailand's convenience store market, benefits from stable consumer spending. Its Q1 2025 net profit rose 8%, outperforming peers in discretionary retail.

The Bottom Line: Act Before the Tide Turns

Thailand's current account surplus is a temporary high-water mark. As trade dynamics shift and deficits loom, investors must act swiftly. Focus on firms with geographic diversification, energy resilience, or domestic demand ties. The clock is ticking—position now before the market prices in 2026's projected $1 billion deficit.

Thailand's economic journey is a masterclass in balancing growth and risk. For investors, the time to act is now.