ABSTRACT

This chapter outlines development of Thailand's external imbalance by focusing on its determinants. It is possible that external imbalances are persistent, because some of the current account determinants do not change or are not flexible enough to restore external equilibrium. Internal equilibrium implies that there is no excess demand or excess supply in the goods market. The impact of internal disequilibrium on external imbalances stemmed mainly from investment and saving imbalances. If the budget deficit is small, current account deficit is largely determined by the investment-saving gap. Current account positions and Gross domestic product growth are related, because growth has an indirect impact on current account via the investment-saving channel. Domestic savings are important financial resources for investors via financial intermediaries. A dismal long-term growth path adjusted by trend of current account surplus can be a sign of an unsustainable economy.