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Thai Baht's Strength Poses Economic Challenges: Economists Warn


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The Thai Baht is experiencing considerable strength against the US dollar, but this financial trend is causing concern among Thai economists and exporters. Despite some benefits, the overall impact on Thailand's economy appears to be negative.

 

Dr. Naris Sathapholdeja, head of Data and Analytics at TMB Thanachart Bank, points out that a stronger baht makes Thai exports and tourism more costly. While it reduces the cost of importing oil—estimated at 1.5 trillion baht annually—this saving is overshadowed by potential losses in tourism revenue and export earnings, which collectively exceed 3.6 trillion baht per year. Naris forecasts the baht could strengthen to below 32 per USD, prompting exporters and tourism operators to urge government intervention.

 

Dr. Amornthep Chawla of CIMB Thai Bank attributes the baht's rise to a weaker US dollar and inflows of capital into emerging markets. He highlights that the Bank of Thailand's decision not to cut the base rate is drawing investments into the Thai bond market, further bolstering the baht. Increased confidence in Thailand's economic policies and its status as a gold trading hub also contribute to the currency's appreciation.

 


 

 

 

Kanchana Chokpaisarnsilp from Kasikorn Research Centre expects short-term fluctuations in the baht, ranging between 32.50 and 32.10 per USD.

 

This financial climate is hitting Thai rice exports hard. Chukiat Opaswongse of the Thai Rice Exporters Association reveals a significant slowdown, with exports likely to reach only 8.5 million tonnes this year, down from earlier projections. Rivals such as India and Vietnam, with weaker currencies, are poised to benefit at Thailand's expense.

 

The pressure is on as the economic effects of a strong baht ripple across Thailand, prompting calls for strategic financial measures to mitigate adverse impacts.

 

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-- 2024-09-25


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There have been several studies over the years that show export volumes are not significantly impacted by the exchange rate of the country that is selling, but almost entirely by the state of the economy of the country that is buying. Any loss that does occur is in THB revenue to the seller, but there is almost no change in volume terms. Most export trade bills are settled in USD, which means the buyer is not impacted by the Baht/dollar exchange rate, no matter if it strengthens or weakens. What does happen is exporters try to increase their price, to compensate for the loss of exchange rate, and this has the potential to reduce export volumes.

 

https://www.bot.or.th/content/dam/bot/documents/en/our-roles/monetary-policy/mpc-publication/monetary-policy-report/mpr-box/MPR_2018_Q2_BOX2.pdf

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