Baht's Biggest Surge Since 1998 Poses Risk to Tourism And Exports

[webfact]

 

The Thai baht is experiencing its sharpest rise in 26 years, reaching levels last seen during the 1998 Asian financial crisis. This surge has hampered Thailand's recovery in the tourism and export sectors, Bloomberg News reports.

 

While the baht's rise is partly linked to a weakening US dollar ahead of the Federal Reserve's anticipated rate cut, its unexpected appreciation against key trade currencies has made Thai products less competitive abroad.

 

Commerce Minister Pichai Naripthaphan and Deputy Finance Minister Paophum Rojanasakul have called on the Bank of Thailand (BOT) to take action to curb the baht’s rapid rise and manage exchange rate volatility.

 

Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), noted that the strong currency has driven up production costs and worsened the influx of low-cost imports from China. "We need a stable baht and help managing financial costs," Kriengkrai emphasized.

 

Paophum added that it's vital for the baht to remain "neither too strong nor too weak, but above all, stable."

Despite continued growth in tourism, the stronger baht may reduce tourists' spending power, particularly affecting shopping and accommodation. Surawat Akaraworamat, vice president of the Tourism Council of Thailand, pointed out that the higher exchange rate makes goods and services appear more expensive to foreign tourists.

 

The baht’s strength may also hamper Thailand's ability to meet its tourism goals for the year. This presents a fresh challenge for Prime Minister Paetongtarn Shinawatra, who is focused on boosting the economy and lowering living costs amid slower growth in Thailand compared to other ASEAN countries. Both tourism and exports are vital economic drivers, repoerted The Nation.

 

Picture courtesy: TTG Asia

 

The BOT has voiced concern over sharp currency fluctuations, with the baht appreciating 9.14% against the US dollar in the past three months, significantly above the yearly average of 7.96%. This volatility has put the export sector under additional pressure.

 

The BOT has committed to stepping in to stabilize the baht and mitigate further damage to the economy. Nattaporn Triratanasirikul, deputy managing director of Kasikorn Research Center, noted that the currency’s sustained strength will be a key topic for the BOT’s Monetary Policy Committee meeting on October 16.

 

TOP Picture courtesy: Thai Rath

 

-- 2024-09-21

 

 

[webfact]

Baht-boom: Thailand’s currency surge leaves tourism, exports short
by Bob Scott

 

Picture courtesy of Nikkei Asia

Thailand’s baht is rocketing towards its biggest quarterly rise since the Asian financial crisis, a development that has key tourism and export industries clutching their pearls.

 

Since the end of June, the baht has surged 10% against the dollar, its most significant gain since early 1998. This sudden leap has prompted frantic appeals from the tourism, hotel sectors, and business chambers for measures to cool down the rally.

 

Commerce Minister Pichai Naripthaphan and Deputy Finance Minister Paopoom Rojanasakul implored the Bank of Thailand (BoT) to step in and manage the baht’s runaway ascent.

 

Driven by a slump in the US dollar ahead of the Federal Reserve’s recent rate cut, the baht’s meteoric rise has far outstripped those of Thailand’s trade partners.

The Federation of Thai Industries (FTI) warns that this disparity may push international buyers to seek cheaper alternatives. Meanwhile, despite robust foreign tourist numbers, the Tourism Council of Thailand fears that the strong baht will soon squeeze spending on shopping and hotels.

 

This currency conundrum is the latest headache for new Prime Minister Paetongtarn Shinawatra, who vowed to stimulate Thailand’s economy and ease the cost of living. While the country’s GDP growth lags behind neighbours like Indonesia and the Philippines, the tourism and export sectors have been rare bright spots.

 

Chinese imports

 

Exports, which constitute nearly 60% of Thailand’s GDP, face fresh hurdles. The baht’s sharp appreciation is exacerbating existing woes—from high production costs to an influx of cheap Chinese imports, bemoans FTI Chairman Kriengkrai Thiennukul.

 

“The rapid baht gains are crippling exporters. They’re at their wits’ end and struggling to stay afloat. We need a stable baht and relief from high financing costs.”

Paopoom added yesterday, September 19, that the currency’s wild swings make it tough for exporters to plan. It’s crucial, he argued, to ensure the baht isn’t “too weak, too strong, or too volatile.”

 

Responding to the soaring volatility, BoT Governor Sethaput Suthiwartnarueput pledged today that the central bank is keeping a close eye on the baht, aiming to prevent extreme swings in exchange rates.

 

The baht’s 3-month implied volatility against the dollar sits at a whopping 9.12%, its highest since January, well above this year’s average of 7.98%, according to Bloomberg data. Foreign funds have poured $2.6 billion into Thai bonds and stocks this quarter, boosting both the currency and the main equities index.

 

The baht’s rally will likely be a hot topic at the BoT rate-setting meeting on October 16, as explained by Nattaporn Triratanasirikul, an economist at Kasikorn Research Centre.

 

Monetary policy

 

Australia & New Zealand Banking Group economist Krystal Tan added that concerns over asset quality, an uneven economic recovery, and scaled-down government aid may increase the chances of monetary policy easing soon.

 

While the baht’s rise hasn’t heavily impacted travellers yet, it could deter foreign tourists from big spending sprees, noted Surawat Akaraworamat, Vice-President of the Tourism Council of Thailand.

 

Suksit Suvunditkul, president of the southern chapter of the Thai Hotels Association, warned that a persistently strong baht could eventually decrease tourist arrivals due to higher costs, reported Bangkok Post.

 

For now, Thailand is on track to meet its target of welcoming 36.7 million tourists this year and generating 2 trillion baht in revenue. Arrivals have already hit nearly 25 million, a 31% jump from last year. But as the baht continues its wild ride, industry leaders are bracing for the stormy seas ahead.

 

Source: The Thaiger 

-- 2024-09-21
 

 

[CANSIAM]

Absolutely no need to transfer USD here just yet..........beer is getting expensive 

[Luuk Chaai]

Wise is currently @ 32.92   ouch !

oh.   and the Fed.. did already drop the rate..

and who can we thank for this ?

https://www.bidenomics.com/

 

[ChasingTheSun]

The baht is still 10% weaker vs USD from 2021.

 

just about the average fx rate vs USD over the last ten years.

 

its a sign that the Thai economy is relatively resilient compared to some weaker neighbors.

 

 

 

 

[chiang mai]

Long term average over past 20 years is around 32, as long as it stays in the range of 31/33, exports and importers shouldn't complain.

 

https://tradingeconomics.com/thailand/currency

 

[ryandb]

6 minutes ago, chiang mai said:

Long term average over past 20 years is around 32, as long as it stays in the range of 31/33, exports and importers shouldn't complain.

 

https://tradingeconomics.com/thailand/currency

 

 

 

na we want 45 baht to the dollar!

[hotchilli]

33 minutes ago, CANSIAM said:

Absolutely no need to transfer USD here just yet..........beer is getting expensive 

60 baht a bottle in my local Mom & Pop shop...

[itsari]

4 minutes ago, hotchilli said:

60 baht a bottle in my local Mom & Pop shop...

Many Thai people are working for the value of 6 beers.

Very expensive 

[hotchilli]

1 minute ago, itsari said:

Many Thai people are working for the value of 6 beers.

Very expensive 

The beers are not expensive, the wages are very low.

[yankee99]

29 minutes ago, chiang mai said:

Long term average over past 20 years is around 32, as long as it stays in the range of 31/33, exports and importers shouldn't complain.

 

https://tradingeconomics.com/thailand/currency

 

Importers will be really happy at 31/32

[chiang mai]

1 minute ago, yankee99 said:

Importers will be really happy at 31/32

So will the public because oil and gas imports will be cheaper hence utility costs and transportation costs will be low.

[yankee99]

12 minutes ago, chiang mai said:

So will the public because oil and gas imports will be cheaper hence utility costs and transportation costs will be low.

yes if importers want to pass the saving or increase profits . Petrol has already dropped from 39 to 35

 

 

[Sig]

Definitely preferred the early 2000s when it was over 40 THB to 1 USD. Those were very good times.

[chiang mai]

Just now, yankee99 said:

yes if importers want to pass the saving or increase profits . Petrol has already dropped from 39 to 35

 

 

Fuel costs are heavily regulated in Thailand. There is a Fuel Subsidy Fund (FSF) operated by the government which regulates the price. When oil import costs are high, the FSF subsidises the costs, when the cost of oil is low, the FSF claws back some of the subsidy.

[cedel]

A high /strong THB + a law to tax foreigners living in Thailand more than 6 months per year (also probably not only on remittances but on their WORLDWIDE total income) and you will have less and less retired expats in Thailand, they will be moving to Malaysia, The Philippines, Vietnam, Cambodia or simply go back to their home country for good! 

Edited 3 hours ago by cedel

[chiang mai]

4 minutes ago, cedel said:

A high /strong THB + a law to tax foreigners living in Thailand more than 6 months per year (also probably not only on remittances but on their WORLDWIDE total income) and you will have less and less retired expats in Thailand, they will be moving to Malaysia, The Philippines, Vietnam, Cambodia or simply go back to their home country for good! 

Not the 130,000+ retirees who have homes and families here they wont. Don't forget, many of us have already seen 37 Baht per Pound and know we can adjust back to that, it's only the newer arrivees that have been spoilt on covid related exchange rates.

[wadsy]

I have a good friend who is Swiss but lives here in Australia and reasonably wealthy. He is an Australian tax resident and submits returns here. He used to spend the majority of the year with his wife in Thailand. I spoke to him yesterday and he commented he will now be spending less than 180 days in Thailand each year from now on until clarity about the tax residency situation purely because he doesn't want to be in Thailand tax system. I know my own plans of full time retirement in Thailand are on hold at the moment.

[cedel]

8 minutes ago, chiang mai said:

Not the 130,000+ retirees who have homes and families here they wont. Don't forget, many of us have already seen 37 Baht per Pound and know we can adjust back to that, it's only the newer arrivees that have been spoilt on covid related exchange rates.

But if a part of those 130, 000+ has to pay lawyers, accountants, and several tens or hundreds of thousands bahts every year that they did not pay in taxes+fees before because they still have income sources abroad mostly in their home country from house /condo renting or else. I'm not sure the majority will agree to stay in a country where they pay more taxes than in their home country where it's maybe tax-free or where they have other exemptions not taken in account in Thailand 🇹🇭 !! 

Edited 3 hours ago by cedel

[smedly]

what are they are they borrowing next year ?

 

 huge amount of money- huge, they have obviously defaulted on current , that is a huge problem, seriously  big problem, i feel a crash coming, in fact it has already happened, look out below

[cedel]

6 minutes ago, wadsy said:

I have a good friend who is Swiss but lives here in Australia and reasonably wealthy. He is an Australian tax resident and submits returns here. He used to spend the majority of the year with his wife in Thailand. I spoke to him yesterday and he commented he will now be spending less than 180 days in Thailand each year from now on until clarity about the tax residency situation purely because he doesn't want to be in Thailand tax system. I know my own plans of full time retirement in Thailand are on hold at the moment.

I know also a few people exactly in the same situation, and it's the same for me : I delayed my return in Thailand to December because I soent already  almost 5 months this year in LOS and until we don't have any certainty, I prefer not to take risks and stay at maximum 179 days.. The tax laws are also not the same in Europe, even if you spend 9 or 10 months out of the country, for my country, you have your house and belongings and income or investments in the country, you remain taxable in your native country.. so, I don't want hassles and risks of having too pay more taxes and lawyer fees than I did until now! 

 

[smedly]

3 minutes ago, smedly said:

what are they are they borrowing next year ?

 

 huge amount of money- huge, they have obviously defaulted on current , that is a huge problem, seriously  big problem, i feel a crash coming, in fact it has already happened, look out below

i am referring to the huge money they are trying  to borrow 

[mdr224]

Those who save in bitcoin are unaffected

[Presnock]

11 minutes ago, cedel said:

But if a part of those 130, 000+ has to pay lawyers, accountants, and several tens or hundreds of thousands bahts every year that they did not pay in taxes+fees before because they still have income sources abroad mostly in their home country from house /condo renting or else. I'm not sure the majority will agree to stay in a country where they pay more taxes than in their home country where it's maybe tax-free or where they have other exemptions not taken in account in Thailand 🇹🇭 !! 

Not only the possibility of having to pay taxes in two separate countries, even if one doesn't have to pay double taxes on any income, just the thoughts of having to do a lot more documentation or if one has a varied income situation, then having to pay a tax agent even to pay less tax or not tax will make many also tired of being a 3rd class resident here.  My opinion and currently I feel secure in that this year I am not affected due to DTA and visa but if in the overall schemes that do come up and I do become  affected I will have second thoughts about living here until I pass away.

[cedel]

2 minutes ago, mdr224 said:

Those who save in bitcoin are unaffected

Anyway, the regulations and taxes are not clear and change every time, even and mostly in Thailand about crypto's, so nobody knows for sure how they will be taxed when using those crypto's to buy goods... 

Again, depending on redsidence

[cedel]

8 minutes ago, Presnock said:

Not only the possibility of having to pay taxes in two separate countries, even if one doesn't have to pay double taxes on any income, just the thoughts of having to do a lot more documentation or if one has a varied income situation, then having to pay a tax agent even to pay less tax or not tax will make many also tired of being a 3rd class resident here.  My opinion and currently I feel secure in that this year I am not affected due to DTA and visa but if in the overall schemes that do come up and I do become  affected I will have second thoughts about living here until I pass away.

I agree 100%...

They want more money in the economy.. but they are "shortsighted", like with the 300 B rapid but unpopular tax on arrival.. they never think twice or for the long term ! 

If we would have to pay tax or report all assessable income, we would still not have right to free medical care, to single (not double unfair pricing) , to buy a land and a house in full legality without having to risk problems or losing a lot of money with thai nominees if they really want it, and don't forget the rich political powerful men with the 25  "borrowed" watches Rolex, Cartier, etc worth billions Baht, they never pay taxes those people.. and all their friends without telling any names, the same injustice.. ppl will know.. 

That would be more than unfair to tax ppl only if they stay over 180 days in Thailand 🇹🇭 ! 

[mikebell]

When I came here 20 years ago, I got 73 to 1 UKP. I used to import 5K = 350,000 baht regularly.  I spent freely; a new car every 3 years; an expensive house/furniture/clothes; meals out in top restaurants; etc.

Now I have an ailing 8 year old car; a rented property; cook all my meals at home; and check supermarket prices to save a baht here & there.  Any further attacks on my income will drive me to the Philippines where I will unfreeze my UK State pension and receive the equivalent of a 450,000 baht increase in my annual income.

[itsari]

1 hour ago, hotchilli said:

The beers are not expensive, the wages are very low.

A rather naive answer. 

The beer for 60 baht is very expensive if the majority of Thai people are on a low wage.

[Bday Prang]

3 hours ago, webfact said:

The Thai baht is experiencing its sharpest rise in 26 years, reaching levels last seen during the 1998 Asian financial crisis.

Strangely I remember things a little differently .  I was getting 90+ baht to the pound in 1998 but  before that it was around 40

Am I "confused"  or was I dreaming?

[cedel]

Look at the price of a San Miguel in the Pillippines in a 7/11,if I remember good the equivalent of 25 baht.. how much is the same beer with the high taxes and duties in Thailand? I think around 60 B!