Baht Slides: Economic Impacts for Thailand

[webfact]

 

Thailand's currency, the baht, has been depreciating significantly, sparking discussions about its future. It reached a six-month low, dropping below 37 to the US dollar.

 

Among other Asian currencies struggling, the Japanese yen reported the highest drop of 10.5% against the dollar this year, with the baht following closely with a decrease of 7-8%.

 

The Bank of Thailand has not yet intervened with measures to strengthen the baht. Piti Disyatat, the deputy governor, mentioned the central bank is keenly observing the currency's movement, pointing out concerns about the possibility of market disruption or a liquidity crunch. 

 

This depreciation is part of a regional trend driven by fears that the US Federal Reserve may maintain high interest rates longer than initially speculated. The relatively higher US interest rate has resulted in a stronger dollar, and consequently, capital outflows from Thai stock and bond markets. 

 

The ongoing warm weather could also potentially impact Thailand's current account flows by affecting tourism. However, Piti remains optimistic about a resurgence in tourism, believing the weaker baht will boost exports and bolster the currency's value. Piyasak Manason, a senior economist at InnovestX Securities Co, agrees with Piti's optimism about the potential boost to exports.

 

Nonetheless, the future value of the baht largely depends on Thailand's economic performance. Faster economic growth could drive capital inflows, strengthening the currency. But hurdles such as delayed budget allocation may hamper this process. 

 

Rating agencies like S&P Global Ratings and Fitch Ratings are closely watching the country's rising government debt.

 

Any downgrades in Thailand’s credit rating could adversely affect the baht's value.

 

TOP: File photo for reference only.

 

-- 2024-05-01

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[bkk6060]

U.S. markets tanking.  Possible interest rate increase warning. Great for the exchange rates, but bad for investors and possibly bad for Biden.

[sammieuk1]

A slide is what the pound did off a cliff face after Brexit, this is just a bit of manipulation at a snail's pace 🤔 

[Walker88]

Interesting FX moves recently, though the baht and yen are falling for different reasons. The baht is a victim of higher US interest rates and a rather moribund Thai economy that is suffering from a worldwide slowdown in general and a Chinese slowdown in particular.

 

The yen is a canary in the coal mine to anyone---especially expats retired in Thailand---who think they are going to live off a government pension. Japan has an aging population and a woefully underfunded pension system to go along with the highest debt-to-GDP of any major nation (at 260%). As the population becomes an inverted pyramid and debt service takes a larger bite of tax revenues, the only solution is to print. Massive printing means a falling currency and inflation for holders of that currency. The yen hasn't been this low against the USD since the late 1980s/early 1990s.

 

A second choice debt-strapped govts have is to renege on the promises of pensions. It isn't as if any pensioner paid anywhere near as much into the system as they expect to receive; pensions have always been a Ponzi Scheme, which worked when the population was growing and there were more young workers entering the system than old folks leaving it.

 

If I was 20 years old and just beginning my adult working life, I would forget pensions exist and plan my own future by saving. If I was a retired pensioner living off the govt pension, I might hope I age and die quickly, because the day of reckoning is coming. I cannot see the govt of any major nation being able to afford their pension and health commitments, unless they join the race to the bottom in terms of the value of their currency.

 

[StayinThailand2much]

"Baht Slides: Economic Impacts for Thailand"

 

More bl**dy cheapo tourists... 🙄

[Gsxrnz]

2 hours ago, Walker88 said:

Interesting FX moves recently, though the baht and yen are falling for different reasons. The baht is a victim of higher US interest rates and a rather moribund Thai economy that is suffering from a worldwide slowdown in general and a Chinese slowdown in particular.

 

The yen is a canary in the coal mine to anyone---especially expats retired in Thailand---who think they are going to live off a government pension. Japan has an aging population and a woefully underfunded pension system to go along with the highest debt-to-GDP of any major nation (at 260%). As the population becomes an inverted pyramid and debt service takes a larger bite of tax revenues, the only solution is to print. Massive printing means a falling currency and inflation for holders of that currency. The yen hasn't been this low against the USD since the late 1980s/early 1990s.

 

A second choice debt-strapped govts have is to renege on the promises of pensions. It isn't as if any pensioner paid anywhere near as much into the system as they expect to receive; pensions have always been a Ponzi Scheme, which worked when the population was growing and there were more young workers entering the system than old folks leaving it.

 

If I was 20 years old and just beginning my adult working life, I would forget pensions exist and plan my own future by saving. If I was a retired pensioner living off the govt pension, I might hope I age and die quickly, because the day of reckoning is coming. I cannot see the govt of any major nation being able to afford their pension and health commitments, unless they join the race to the bottom in terms of the value of their currency.

 

 

"If I was 20 years old and just beginning my adult working life, I would forget pensions exist and plan my own future by saving."

 

I did just that. Saw the writing on the wall in 1980's interest rate debacle.  Backed myself in a host of ventures and came out on top. I'll never receive a pension, but I won't miss it as a government pension wouldn't even cover my monthly booze bill.

 

Thankfully my sons are following me.  They had no choice - I was able to largely undo the damage done to them via state education indoctrination.

[morrobay]

2 hours ago, Walker88 said:

Interesting FX moves recently, though the baht and yen are falling for different reasons. The baht is a victim of higher US interest rates and a rather moribund Thai economy that is suffering from a worldwide slowdown in general and a Chinese slowdown in particular.

 

The yen is a canary in the coal mine to anyone---especially expats retired in Thailand---who think they are going to live off a government pension. Japan has an aging population and a woefully underfunded pension system to go along with the highest debt-to-GDP of any major nation (at 260%). As the population becomes an inverted pyramid and debt service takes a larger bite of tax revenues, the only solution is to print. Massive printing means a falling currency and inflation for holders of that currency. The yen hasn't been this low against the USD since the late 1980s/early 1990s.

 

A second choice debt-strapped govts have is to renege on the promises of pensions. It isn't as if any pensioner paid anywhere near as much into the system as they expect to receive; pensions have always been a Ponzi Scheme, which worked when the population was growing and there were more young workers entering the system than old folks leaving it.

 

If I was 20 years old and just beginning my adult working life, I would forget pensions exist and plan my own future by saving. If I was a retired pensioner living off the govt pension, I might hope I age and die quickly, because the day of reckoning is coming. I cannot see the govt of any major nation being able to afford their pension and health commitments, unless they join the race to the bottom in terms of the value of their currency.

 

You might have gotten by as a second-third rate government employee - But forget about economist 

[connda]

Baht Slides: Economic Impacts for Thailand

 

Happy farang ex-pats.

[connda]

Just wait until the government fulfills its vote-buying promise by handing out 10,000 THB to every Thai adult in Thailand. 

Can you hear that sound?   "Bbbbbrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr" 
The sound of new money injected into a weakening Thai financial system.
And then the screams of Thais as inflation decimates the economy and average Thais.

<Fills cheeks with air>  "PUFF"

[smedly]

4 hours ago, webfact said:

The Bank of Thailand has not yet intervened with measures to strengthen the baht

oh like increasing interest rates lol

 

said it many times, this is good for exports and tourism - not sure I see many downsides unless of course you are a local wanting to invest outside Thailand 

[smedly]

51 minutes ago, Gsxrnz said:

but I won't miss it as a government pension wouldn't even cover my monthly booze bill.

I have been living here 24 years on a pension, not old enough yet for a state pension in the UK, I pay tax on my income, it does cover my booze bill lol, horses for courses

[tomazbodner]

THB isn't sliding as much as Indian Rupees. Exchanged 2 THB to 5 INR a week back, didn't spend any, exchanged back and made a profit.

[hotchilli]

2 hours ago, smedly said:

I have been living here 24 years on a pension, not old enough yet for a state pension in the UK, I pay tax on my income, it does cover my booze bill lol, horses for courses

Been here 16 years on a private pension, my UK pension starts next year... decisions decisions.

[john donson]

gold price is going down

 

so is bitcoin

 

related?

[Hakuna Matata]

Very good for Thailand exporters!

 

Not good for Thailand importers 🙂

[Hakuna Matata]

3 hours ago, tomazbodner said:

THB isn't sliding as much as Indian Rupees

 

As well as Malaysian ringgit and Japanese yen?

[Mike Lister]

1 minute ago, john donson said:

gold price is going down

 

so is bitcoin

 

related?

The price of gold is falling because the threat of war in the ME has subsided.

 

The value of THB is falling because USD is strengthening, for two reasons. The first is its safe haven status in times of conflict and second because the US economy is roaring back to life and US rates will remain higher for longer.

[soalbundy]

3 hours ago, connda said:

Just wait until the government fulfills its vote-buying promise by handing out 10,000 THB to every Thai adult in Thailand. 

Can you hear that sound?   "Bbbbbrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr" 
The sound of new money injected into a weakening Thai financial system.
And then the screams of Thais as inflation decimates the economy and average Thais.

<Fills cheeks with air>  "PUFF"

Just copy America, what can go wrong.

[shackleton]

Surprised no comments from ex pat Brits on the exchange rate 🥳

Tourists will be happy 😊 

[smedly]

27 minutes ago, Hakuna Matata said:

Very good for Thailand exporters!

 

Not good for Thailand importers 🙂

thailand is primarily export which includes tourism

[roquefort]

1 hour ago, Mike Lister said:

The value of THB is falling because USD is strengthening, for two reasons. The first is its safe haven status in times of conflict and second because the US economy is roaring back to life and US rates will remain higher for longer.

Nothing to do with the unfunded 10,000 baht vote buying scheme then?

[Mike Lister]

11 minutes ago, roquefort said:

Nothing to do with the unfunded 10,000 baht vote buying scheme then?

That scheme is still not live so I doubt that it's priced into the value of THB.  Most of what we're seeing with THB presently is driven by USD value and USD interest rates. Once government debt increases because of the scheme, then I would expect to see further falls.

 

Another aspect is that as of the end of March, only 50% of the current year budget has been disbursed, the other 50% was with held to help support the case that the economy was in trouble hence the giveaway scheme was much needed. What is likely to happen is that the scheme will be started, the remaining budget released and government will look like hero's for saving the day, then they can say, I told you so. What will happen thereafter is that water will find its own level and things will revert to the norm and everyone will realise that government just increased its debt, for no good reason and the Baht will fall further.

[BangkokReady]

9 hours ago, webfact said:

TOP: File photo for reference only.

 

Oh.  It isn't the specific money that they're talking about in the article?  🤔

[roquefort]

33 minutes ago, Mike Lister said:

That scheme is still not live so I doubt that it's priced into the value of THB.  Most of what we're seeing with THB presently is driven by USD value and USD interest rates. Once government debt increases because of the scheme, then I would expect to see further falls.

 

Another aspect is that as of the end of March, only 50% of the current year budget has been disbursed, the other 50% was with held to help support the case that the economy was in trouble hence the giveaway scheme was much needed. What is likely to happen is that the scheme will be started, the remaining budget released and government will look like hero's for saving the day, then they can say, I told you so. What will happen thereafter is that water will find its own level and things will revert to the norm and everyone will realise that government just increased its debt, for no good reason and the Baht will fall further.

You could be right, although markets tend to anticipate these things and price them in advance. In any case only one way to go for the baht from here, which I suppose will make a lot of expats happy.

[natway09]

The present Thai Premier has it all under control. 555

Did he not want to reduce interest at the Central Bank by 25% which obviously was resisted by anyone who

really knows international finance.

There is going to be no money left in the pot after about August & exchange rates will fall further.

Could become a trash currency by the end of 2025

 

[Srikcir]

10 hours ago, bkk6060 said:

U.S. markets tanking. 

Hardly.

"Can the rip-roaring good times for the stock market last?"

by David Brancaccio, Meredith Garretson, and Erika Soderstrom, March 14, 2024  marketplace.org

• The S&P 500 is up about 32% in a year. That’s more than quadruple the 30-year average (inflation-adjusted dividends reinvested).
• The S&P has returned 11% a year in real terms. 

For Americans living abroad receiving USD income, foreign service and product costs boost spending power. Albeit import of American products may reduce or disappear from markets as Thai importers lose margins.

[Elkski]

37.2 tbht to USD seems higher than 6 months ago.   Highest I recall since before 2016

[metisdead]

A post trolling about British pensioners contravening our Community Standards has been reported and removed.

[Mike Lister]

58 minutes ago, Srikcir said:

Hardly.

"Can the rip-roaring good times for the stock market last?"

by David Brancaccio, Meredith Garretson, and Erika Soderstrom, March 14, 2024  marketplace.org

• The S&P 500 is up about 32% in a year. That’s more than quadruple the 30-year average (inflation-adjusted dividends reinvested).
• The S&P has returned 11% a year in real terms. 

For Americans living abroad receiving USD income, foreign service and product costs boost spending power. Albeit import of American products may reduce or disappear from markets as Thai importers lose margins.

Agreed

[captpkapoor]

9 hours ago, StayinThailand2much said:

"Baht Slides: Economic Impacts for Thailand"

 

More bl**dy cheapo tourists... 🙄

Yeah! I agree. All these singlet wearing, scooter riding, Brits (mostly) in flip flops!