Thailand’s economy in 2023 could pose multiple challenges to government and central bank

[webfact]

 

Thailand’s gross domestic product (GDP) will expand by around 3-4 percent this year, only slightly higher than last year’s 3.2 percent, the National Economic and Social Development Council, a state think-tank, has forecast. But many economists believe the GDP growth is below the country’s potential.

 

Impact of stronger baht 

 

The baht has strengthened recently due to investors expecting an influx of tourists from China after Beijing announced the full reopening of the country from January 8. The strengthening of the baht appears to be unsubstantiated by the country’s economic fundamentals as recovery remains fragile.

 

“The recent strengthening of the baht suggests that it is not in line with economic fundamentals, and the Bank of Thailand (BOT) faces a challenge to manage its exchange rate,” said Piyasak Manason, head of wealth research at InnovestX Securities Co.

 

The baht on January 5 morning rose to 33.78 against the dollar, its strongest in eight months.

 

Full story: https://www.thaipbsworld.com/thailands-economy-in-2023-could-pose-multiple-challenges-to-government-and-central-bank/

 

-- © Copyright Thai PBS 2023-01-11

 

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[ThailandRyan]

19 minutes ago, webfact said:

The baht has strengthened recently due to investors expecting an influx of tourists from China after Beijing announced the full reopening of the country from January 8. The strengthening of the baht appears to be unsubstantiated by the country’s economic fundamentals as recovery remains fragile.

Where is @nigelforbes.  Did I not indicate that this was why the baht had strengthened and it was all based upon speculation as this article indicates? In essence some sort of manipulation has occurred.

 

As the article further indicates:

“The recent strengthening of the baht suggests that it is not in line with economic fundamentals, and the Bank of Thailand (BOT) faces a challenge to manage its exchange rate,” said Piyasak Manason, head of wealth research at InnovestX Securities Co."

Edited January 11, 2023 by ThailandRyan

[hotchilli]

2 hours ago, webfact said:

“The recent strengthening of the baht suggests that it is not in line with economic fundamentals, and the Bank of Thailand (BOT) faces a challenge to manage its exchange rate,” said Piyasak Manason, head of wealth research at InnovestX Securities Co.

Someones been "managing" the Thai baht for a very long time.

[Thingamabob]

The Thai baht has always been 'adjusted' so as to assist the rich and powerful when making overseas investments, or when importing from overseas. It has never been allowed to float in accordance with market conditions. This did, however, go horribly wrong in 1997/8 when creditors world-wide decided to demand repayment of their loans to Thailand, and the baht lost almost 100% of it's former value sparking a world-wide financial crisis.

[nigelforbes]

On 1/11/2023 at 12:26 PM, ThailandRyan said:

Where is @nigelforbes.  Did I not indicate that this was why the baht had strengthened and it was all based upon speculation as this article indicates? In essence some sort of manipulation has occurred.

 

As the article further indicates:

“The recent strengthening of the baht suggests that it is not in line with economic fundamentals, and the Bank of Thailand (BOT) faces a challenge to manage its exchange rate,” said Piyasak Manason, head of wealth research at InnovestX Securities Co."

So, one broker says the strengthening is blah blah blah and that does it for you does it and there must be something amiss? Cool....don't give up the day job.

[ThailandRyan]

Just now, nigelforbes said:

So, one broker says the strengthening is blah blah blah and that does it for you does it and there must be something amiss? Cool....don't give up the day job.

You obviously disagree with the article and what the BOT says, good on you.

[nigelforbes]

1 minute ago, ThailandRyan said:

You obviously disagree with the article and what the BOT says, good on you.

I don't disagree with what BOT says, I agree. But I don't think you understand what that article says, what it means or how the FOREX system works. The strength of THB currently is NOT in line with economic fundamentals, TODAY, the broker was right in that respect. Neither equity valuations nor FOREX bids are based on todays actuals, they are based on what is forecast for tomorrow. Dealers views on currency strength are forward looking, just as the equities indices such as the S&P are, they both form valuations of future worth, based on events they have high confidence will happen. If their views turn out to be wrong or something changes, valuations will change very quickly. Dealers have bid up the value of THB because they know that Chinese tourists have started to arrive unhindered. That means more revenue, more Foreign Currency Reserves, more current account surplus and a stronger Baht. It's irrelevant that those things haven't all happened yet, they know with a high degree of certainty that they will and that's sufficient. 

[ThailandRyan]

39 minutes ago, nigelforbes said:

I don't disagree with what BOT says, I agree. But I don't think you understand what that article says, what it means or how the FOREX system works. The strength of THB currently is NOT in line with economic fundamentals, TODAY, the broker was right in that respect. Neither equity valuations nor FOREX bids are based on todays actuals, they are based on what is forecast for tomorrow. Dealers views on currency strength are forward looking, just as the equities indices such as the S&P are, they both form valuations of future worth, based on events they have high confidence will happen. If their views turn out to be wrong or something changes, valuations will change very quickly. Dealers have bid up the value of THB because they know that Chinese tourists have started to arrive unhindered. That means more revenue, more Foreign Currency Reserves, more current account surplus and a stronger Baht. It's irrelevant that those things haven't all happened yet, they know with a high degree of certainty that they will and that's sufficient. 

Ergo and when I said that in another OP, not using the exact words, you told me to Stop and I was wrong with my view.....toodles. Manipulation is manipulation whether using the FOREX or buying currency in order to drop and strengthen the Baht, speculation in buying up funds is always risky, so tell me what will occur when there view does not materialize....guess I should just short it....

Edited January 12, 2023 by ThailandRyan

[nigelforbes]

7 hours ago, ThailandRyan said:

Ergo and when I said that in another OP, not using the exact words, you told me to Stop and I was wrong with my view.....toodles. Manipulation is manipulation whether using the FOREX or buying currency in order to drop and strengthen the Baht, speculation in buying up funds is always risky, so tell me what will occur when there view does not materialize....guess I should just short it....

I don't understand where you get "manipulation" from, I've read the entire article a couple of times and it seems to cover a hodge podge of economic related topics. Exports, consumer pricing, electricity costs, food production, they're all covered but I don't see that manipulation forms any aspect of those things. 

 

Yes the Baht has strengthened because of hot money or capital inflows, USD 1.6 bill. already in January, plus the NEWS that Chinese tourists WILL begin to arrive, that is certain. Has the Baht strengthened too much too quickly? Perhaps. Exporters seem to think it is now a threat to their business but in recent years they were able to get by when it was 29, today it's 33 and they're already making noises, hmmm, they're complaining early this year! In reality the ex. rate is not a threat to their business, it's a threat to their profit margins, that's why they are complaining. 

 

Is the Baht out of line with economic fundamentals, yes, the value of THB is forward looking so there's no surprise there. All things being equal the Chinese tourists will arrive, start spending and money will begin to circulate and the general economy will begin to improve, there's nothing new or unexpected there.

 

The BIG questions are, will the Baht continue to strengthen and if so, will BOT need to take action, if so what.

 

It is the NEWS that tourists will arrive that has caused THB to strengthen, not their actual arrival, that is why brokers have bid up the price. We will have to wait and see now, how many arrive, what their economic impact is, whether there will be negative impacts from covid as a result, and, what other factors change because they all have an impact on future currency direction. Other factors include the strength of our trading partners economic recovery and interest rates at the Fed., amongst other things. 

 

If THB does strengthen, will BOT need to take action because now the stage has been set, we're finally getting somewhere close potentially to the words intervention and manipulation! The short answer is yes, that's their job under IMF rules and a key function of their role. Under IMF rules they will smooth out the peaks and troughs in the exchange rate, in order to help exporters, that's what they MUST do. If THB becomes too strong, say 29 or 28, what will happen then, will they intervene. Yes, but not necessarily by selling Baht to weaken the currency, that would be foolish and a costly waste of time and they know that. But there are many other things they could both do directly and strongly recommend, that would achieve the same result. Loosening currency controls even further might be one, might (they've done this previously), increasing imports by removing import restrictions might be another, they have plenty of tools. 

 

None of that is manipulation, all of that is what ANY Central Banks does (or is required to do), it's their job. Just because this is Thailand  and corruption exists, doesn't mean that corruption exists everywhere and that everything is bent or shady, some aspects work very well indeed. Just because BOT smoothes out peaks and troughs and reduces volatility in the exchange rate, that is not manipulation, other than in a technical sense. For the time being, everyone has to sit and watch to see what happens next. 32/33 is a sweet spot for the ex. rate as both imports and exports are concerned and the currency is still well within range. There isn't a problem currently and there may not be one downstream.

 

 

[John Drake]

From the day Prawit complained that the baht was too weak against the dollar and that it should have been no more than 35 baht to the dollar, from that day onwards the baht has steadily increased against the dollar. The Bank of Thailand admitted they intervened against the dollar to bring "stability." 

[nigelforbes]

1 hour ago, John Drake said:

From the day Prawit complained that the baht was too weak against the dollar and that it should have been no more than 35 baht to the dollar, from that day onwards the baht has steadily increased against the dollar. The Bank of Thailand admitted they intervened against the dollar to bring "stability." 

Please google, "BOT says it has intervened to steady the Baht", read the link in the paper that cannot be named and then get back to us!

 

BOT intervened to reduce volatility, that's their job. They did not intervene

to strengthen the Baht.

[John Drake]

32 minutes ago, nigelforbes said:

BOT intervened to reduce volatility, that's their job.

So 35 to 38 is volatility. Must intervene. But 38 to 33 is not. Everything just fine. Laughable.

[nigelforbes]

2 minutes ago, John Drake said:

So 35 to 38 is volatility. Must intervene. But 38 to 33 is not. Everything just fine. Laughable.

Tell us, how will you know, if and when BOT intervenes in markets to reduce volatility, if you don't read it in the newspapers?

[John Drake]

7 minutes ago, nigelforbes said:

Tell us, how will you know, if and when BOT intervenes in markets to reduce volatility, if you don't read it in the newspapers?

We knew last time because they released a statement. And we know why that was, too, don't we? Because releasing the statement itself increased the pile on and helped strengthen the baht (or in  nigelforbesenese "reduce volatility.") 555

[nigelforbes]

2 minutes ago, John Drake said:

We knew last time because they released a statement. And we know why that was, too, don't we? Because releasing the statement itself increased the pile on and helped strengthen the baht (or in  nigelforbesenese "reduce volatility.") 555

Sooo, you knew they intervened when the Baht was weakening against USD, because you read it in the papers. But because you haven't read in the newspapers that they have intervened once again, now it is is returning to normal, you assume they haven't. Could it be that a return to normal, isn't news worthy and didn't deserve a press release? And it could it be that they intervened but didn't tell you...how rude of them! You're a funny guy, I like people who make me chuckle.

[nigelforbes]

Here's two charts. The first is the value of the US Dollar Index, see how it strengthened From January to October and then dived back to near 100 (normal) in the last two months of the year.

 

In the second chart, see the USD/THB exchange rate over the same period. See how it weakened against USD, over exactly the same period and how it strengthened rapidly over the last two months also....can you join up the dots I wonder!

 

Oh and to add, a definition of volatility: 

noun

 

1. 1.

   liability to change rapidly and unpredictably, especially for the worse.

   "the succession of new rulers contributed to the volatility of the situation"

 

https://www.xe.com/currencycharts/?from=USD&to=THB

 

https://www.marketwatch.com/investing/index/dxy

 

 

Edited January 13, 2023 by nigelforbes
Add links

[John Drake]

7 minutes ago, nigelforbes said:

Sooo, you knew they intervened when the Baht was weakening against USD, because you read it in the papers. But because you haven't read in the newspapers that they have intervened once again, now it is is returning to normal, you assume they haven't.

It was in the papers, because the BoT released a statement. Anybody with any brains at all knows that manipulation of finances goes on in this country to the benefit of a tiny elite so they can buy property, soccer teams, and companies in other countries. That's why Thai exporters are already complaining about an overly strong baht. And that's why nobody will listen to them. Not when there are buyouts to undertake, mergers to make, and a Bentley or two or dozens to be had, along with some large estates to buy. But go ahead and pretend your George Soros and the king of the forex. 

[nigelforbes]

And just like that, he was gone. ????

[nigelforbes]

Like so many other posters here, you use the word manipulation without understanding what it means in an economic sense, as it pertains to a Central Bank and the currency, nor do you understand the role of a Central Bank. You think that manipulation is to buy and sell Baht, without understanding why. You also do not understand that there are many other ways to alter the value of the Baht, without resorting to buying and selling the currency.  The second the Baht moves in a way that causes surprise, somebody screams manipulation and tells us how the mysterious “they” have been doing it for years….poppycock!

 

If people would but study Thailand’s economic framework they would quickly realise that the value of exports are nearly always greater than imports. Why? To protect home markets, products and suppliers, plus it ensures a current account surplus, which means a strong Baht. That is the framework within which currency manipulation has to be viewed, as do the actions of the Central Bank. THAT is the problem that causes the US to call Thailand a currency manipulator, not Central Bank intervention. So when the Baht rises and falls and posters cry “fraud, they’re buying Baht again”, it’s so far removed from the reality that it’s beyond sad, it’s like suggesting the car won’t start because the tire is flat.

[nigelforbes]

The following link talks about currency manipulation in Thailand in 2017 and may help some posters shed their blinkers since it too talks about current accounts and surpluses, along with the US trade problem. One quote of note is that Thailand, "is pretty clearly now intervening to hold its currency down". 

 

https://www.cfr.org/blog/thailand-currency-manipulator

Edited January 13, 2023 by nigelforbes

[nigelforbes]

The charts and link below shows which countries are considered to be currency manipulators and more importantly why, interestingly Switzerland, and Vietnam are two of the biggest offenders, according to the US Treasury definition. BUT the problem is not really currencies, the real issue is trade and especially a trade imbalance with the US. These are countries, Thailand included, that export lots of goods to the US but don't import an equal amount in return. That causes the current account surplus which in turn causes the currency to strengthen. Remember, USD is the Reserve Currency and export bills are settled in USD. If you've read the two links I've posted, two things should be clear. The first is that currency strength is a bi-product of successful export levels and lower than average import levels. The second is that these countries are trying to weaken their currencies, not strengthen them, at least that is the desire because a weaker currency supports exports...catch22. There is of course a point at which weaken becomes too weak, hence the sweet spot of 32 or  33. 

 

Lastly, if you read the first link you'll see that BOT engages in forward contracts to hedge against foreign currency fluctuations. The author classifies that as currency manipulation but I doubt many other do. Personally, I regard that as a sensible risk mitigation measure, especially since the US is seemingly unable to keep the value of its currency even a little bit stable (not a bash, just a simple fact).

 

 https://www.cfr.org/article/tracking-currency-manipulation