The lowdown on net errors and omissions

Speculation that baht appreciation is partly due to the expansion of NEO in balance of payments is ruled out

- SOMRUEDI BANCHONGDUANG

Baht appreciation this year was attributed to a weak dollar, greater clarity in Thai politics and local gold trade.

he baht has continuously appreciated this year, with the Bank of Thailand attributing it primarily to a weaker dollar. Greater clarity in domestic politics lifted investor confidence, and Thailand's gold trade further supported the currency.

Year-to-date the baht has strengthened by around 7% against the dollar. Foreign capital recorded a net outflow from the Thai stock market, but a net inflow into the bond market.

During Sept 1-17, foreign investors posted a net capital outflow of roughly US$100 million from the Thai stock market, while the local bond market had a net inflow of $534 million, according to the central bank.

Yet observers are curious about whether the stronger baht could be partly attributed to an expansion of net errors and omissions (NEO) in the balance of payments, with some speculating this expansion may be linked to unidentified or “grey” money.

Chayawadee Chai-anant, assistant governor for corporate relations at the central bank, said NEO refers to statistical discrepancies in the balance of payments. The term reflects transactions between residents and nonresidents that cannot yet be classified under specific categories.

These activities may involve trade in goods and services, changes in asset holdings between Thai residents and foreigners, or cross-border payments and currency exchanges.

In practice, it is challenging to capture every transaction completely or in real time. As a result, NEO typically arises from two main factors:

1. Delayed data availability, such as foreign direct investment or profit repatriation by foreign companies, which rely on financial statements submitted to the Business Development Department.