Bank of Thailand Interest Rate Cut Offers Boost to Tourism Sector

[webfact]

 

Thailand's tourism sector gets a boost following an unexpected interest rate cut by the Bank of Thailand, reducing the official rate by 25 basis points to 2.25% on Wednesday. This move is poised to energise the sector, allowing tour operators to expand and attract more tourists.

 

Sanga Ruangwattanakul, Khao San Road Business Association president, stated that the rate cut positions the tourism industry for growth. Operators, burdened by previous high rates, now have an opportunity to borrow at lower costs to improve or expand their services, potentially increasing competitiveness.

 

"The economy stands to benefit broadly, as people might cash out savings, boosting investment and consumer spending," stated Mr Sanga. The potential weakening of the baht, following the rate cut, could further encourage international tourism.

 

Suksit Suvunditkul, Thai Hotels Association's southern chapter president, noted that tourists still see Thailand as an affordable destination despite previous price hikes. "The central bank needs to maintain the currency within acceptable limits to prevent negative impacts on tourism," remarked Mr Suksit.

The tourism industry has learned from past challenges, such as the significant decline in Russian tourists due to the 2014 financial crisis. However, Mr Suksit remains optimistic, recalling the 1997 economic crisis when a favourable foreign exchange rate spurred tourism.

 

Hotels in Phuket anticipate occupancy rates to soar to 80%, expecting better revenue from increased room rates. Meanwhile, forward bookings for Khao San Road remain moderate at 40% for November, indicating room for improvement, reported Bangkok Post.

 

To catalyse growth, Mr Sanga suggests that the government collaborate on tourism campaigns. These could include tax incentives for hotel bookings, enhancing festival preparations, and improving infrastructure security, especially in anticipation of the cool season festivities.

 

Picture courtesy: Thai Rath

 

-- 2024-10-17

 

 

[smedly]

how on earth does a strong baht help tourism ?

 

they obviously need to do something different 

[chiang mai]

6 minutes ago, smedly said:

how on earth does a strong baht help tourism ?

 

they obviously need to do something different 

In convoluted theory, according to the article, a stronger baht means lower interest rates which means lower borrowing costs. That means tour operators can borrow more money cheaper, to do things to attract more tourists! 

 

Ah believes this is something called spin!

 

 

[hotchilli]

6 hours ago, webfact said:

Thailand's tourism sector gets a boost following an unexpected interest rate cut by the Bank of Thailand, reducing the official rate by 25 basis points to 2.25% on Wednesday. This move is poised to energise the sector, allowing tour operators to expand and attract more tourists.

Might take more than a few days to kick-in

[hotchilli]

6 hours ago, webfact said:

"The economy stands to benefit broadly, as people might cash out savings, boosting investment and consumer spending," stated Mr Sanga.

Such a visionary

[FlorC]

Again , last week gold had a dip , the thb dipped , now gold is back higher , nearly 80k euro and the thb goes up.

The goldshops here don't have to change their price , gold in thb is stable. 

[khunPer]

And in another news article today, the resorts are making a rate hike up to the high season, so probably won't change much...
 

 

[black tabby12345]

On 10/17/2024 at 8:29 AM, smedly said:

how on earth does a strong baht help tourism ?

 

 

 

In economic theory, Central Bank Interest Cut usually has an effect to weaken the currency of the respective country.

It makes own country money  Looks  Less Attractive to the eyes of the currency traders(encouraging them to sell rather than buy).

 

Even though it doesn't always work that way.

Other factors like Current Account Balance(if the country is in black or red) and Foreign Exchange Reserve(currently pretty high in Thailand)  can reduce the impact of the lower interest rate.

 

 

 

 

[smedly]

52 minutes ago, black tabby12345 said:

In economic theory, Central Bank Interest Cut usually has an effect to weaken the currency of the respective country.

no kidding

 

maybe doesn't apply in a 3rd world corrupt banana state

[black tabby12345]

6 hours ago, smedly said:

no kidding

 

maybe doesn't apply in a 3rd world corrupt banana state

 

You better separate your emotion, and facts.

Otherwise, you are just giving away your ignorance based on prejudice.

 

Facts:

Thailand is strongly in Black, not in Red.

And their Foreign Exchange Reserve significantly increased, compared to 2 years ago.

These things are economic fundamentals behind current High Baht.

 

Thailand foreign exchange reserve s world ranking - Google Search

 

[chiang mai]

Not all players believe the US Fed will cut rates as currently thought, many believe the US 10 year will go back to 5% inside 6 months. That being the case, USD will remain stronger for longer and that means more Baht per buck.

[realfunster]

10 hours ago, black tabby12345 said:

 

In economic theory, Central Bank Interest Cut usually has an effect to weaken the currency of the respective country.

It makes own country money  Looks  Less Attractive to the eyes of the currency traders(encouraging them to sell rather than buy).

 

Even though it doesn't always work that way.

Other factors like Current Account Balance(if the country is in black or red) and Foreign Exchange Reserve(currently pretty high in Thailand)  can reduce the impact of the lower interest rate.

 

 

 

 

 

Not inaccurate but they have left it late and they are behind the US who just cut 0.5%. 

 

Dare I say it but Srettha was right in suggesting an earlier rate cut might have set some momentum for a weaker THB for tourism/exports and to stimulate local investment. 

[lapamita]

On 10/17/2024 at 3:29 AM, smedly said:

how on earth does a strong baht help tourism ?

 

they obviously need to do something different 

they reduced the intrest rate , in an attempt to make the baht weaker in the USD/THB pair.

in mediumterm it could help to make the THB weaker , but imposses other risks