How Does The Baht Stay So Strong?

[madjbs]

What is obvious from the table is that the Thai Baht has fallen a lot less than most other currencies. My personal guess is that the Bank of Thailand is supporting the currency (to save face ). My personal conviction is that we will see it fall drastically within 6-12 months, when exports really start to fall. Remember that exports account for 60-70% of Thailand's GDP.

/ Priceless

Actually you are wrong, The BOT is not propping up the Baht at all, the foreign exchange reserves are still increasing. If the Baht had indeed dropped at the same rate as other currencies, it would have taken a HUGE amount of foreign reserves to revalue it at the current level, which is obviously not the case.

[madjbs]

.

Edited January 25, 2009 by madjbs

[Priceless]

Remember that exports account for 60-70% of Thailand's GDP.

That figure is incorrect...it's nowhere near that high...it isn't for any country...even for export powerhouses like Germany, Japan, and China. Maybe you are thinking that Thailand earns 60-70% of its foreign exchange earnings from exports, with the balance coming from tourism and other sources.

No, I am not. I am thinking exactly what I am saying Figures tend to vary somewhat over time and between different sources, but the 60-70% figure is correct and has been for quite some time.

Estimates for 2008 (according to the CIA World Factbook https://www.cia.gov/library/publications/th...os/th.html#Econ ):

GDP (at official exchange rate): USD 272 billion

Exports (fob): USD 175 billion

Export share of GDP: 64.3%

One thing that never ceases to amaze me, on forums like this, is the willingness of some posters to state as fact something that is completely wrong, and that could very easily have been checked.

/ Priceless

[MeetJohnDoe]

Thailand's export/import is 60-70% of the Thai GDP. It is scary hight and way higher than any western country.

You know, you're right (I did a little surfing). I knew exports were important but I had no idea they were that high a percentage of GDP. Will exports likely to suffer markedly over the next year or so, Thais will be in for some hurt over that period. Weakening the baht somewhat may help exports but if your customers are skint, it doesn't really matter how competitively priced your exports are now does it

[cclub75]

No, I am not. I am thinking exactly what I am saying Figures tend to vary somewhat over time and between different sources, but the 60-70% figure is correct and has been for quite some time.

Estimates for 2008 (according to the CIA World Factbook https://www.cia.gov/library/publications/th...os/th.html#Econ ):

GDP (at official exchange rate): USD 272 billion

Exports (fob): USD 175 billion

Export share of GDP: 64.3%

Beware, from an accounting point of view, you take only net exports for the GDP calculation :

GDP = consumption + investment + government spending + (exports minus imports)

So actually, both of you are right (or wrong), it depends of what you're speaking about.

There is one good source of infos and analyses for GDP : ThaiCrisis

http://thaicrisis.wordpress.com/2008/11/24...ad-omen-for-q4/

[Priceless]

What is obvious from the table is that the Thai Baht has fallen a lot less than most other currencies. My personal guess is that the Bank of Thailand is supporting the currency (to save face ). My personal conviction is that we will see it fall drastically within 6-12 months, when exports really start to fall. Remember that exports account for 60-70% of Thailand's GDP.

/ Priceless

Actually you are wrong, The BOT is not propping up the Baht at all, the foreign exchange reserves are still increasing. If the Baht had indeed dropped at the same rate as other currencies, it would have taken a HUGE amount of foreign reserves to revalue it at the current level, which is obviously not the case.

You're right, I should have checked before guessing Have you got a better guess, or even some factual information on what causes the strong THB?

I am one of the sufferers, even though my income is not in GDP. For purely egoistic reasons, I'd love to see the THB fall 10-20%. Incidentally, I also think it is necessary for the economy, even though it will cause pain to some people.

/ Priceless

[Priceless]

No, I am not. I am thinking exactly what I am saying Figures tend to vary somewhat over time and between different sources, but the 60-70% figure is correct and has been for quite some time.

Estimates for 2008 (according to the CIA World Factbook https://www.cia.gov/library/publications/th...os/th.html#Econ ):

GDP (at official exchange rate): USD 272 billion

Exports (fob): USD 175 billion

Export share of GDP: 64.3%

Beware, from an accounting point of view, you take only net exports for the GDP calculation :

GDP = consumption + investment + government spending + (exports minus imports)

So actually, both of you are right (or wrong), it depends of what you're speaking about.

There is one good source of infos and analyses for GDP : ThaiCrisis

http://thaicrisis.wordpress.com/2008/11/24...ad-omen-for-q4/

I'm a little bit out of my depth here, since I am not an economist by profession and my experience in the field is limited to micro economics as opposed to the macro that we are discussing here.

However, I can see the case for trying to eliminate the imports that are later re-exported as components of export products. I have a problem with eliminating all imports, though. This would mean e.g. that an increase in the world oil price (as we saw last summer) would decrease the export sector's importance to the Thai economy (by decreasing the net value, i.e. exports - imports)

Could you elaborate, please

/ Priceless

[cclub75]

I'm a little bit out of my depth here, since I am not an economist by profession and my experience in the field is limited to micro economics as opposed to the macro that we are discussing here.

However, I can see the case for trying to eliminate the imports that are later re-exported as components of export products. I have a problem with eliminating all imports, though. This would mean e.g. that an increase in the world oil price (as we saw last summer) would decrease the export sector's importance to the Thai economy (by decreasing the net value, i.e. exports - imports)

Could you elaborate, please

It's not a vicious attempt from my side : I'm speaking about international definition. And logic.

GDP = Gross Domestic Product. Aka everything a country produces (goods and services). You would admit that when you import something... it's like a substitution : you're not going to produce it, right ?

Therefore, this is why within the GDP calculation, they take only net exports (exports minus imports).

Furthermore, what you import will show up into other GDP's components (for instance, you import a machine, but this machine is going to show up into the "Investment" component of GDP).

So to summarize : it's a matter of definition.

If you speak about real production, then exports is a large part of the GDP. If you speak on accounting terms, then it's less etc. Then we can speak about exports and employment... Or exports and taxes collections... There are many ways to gauge the importance of exports for the economy.

That's the beauty of economy : everybody can find what he wants into the data.

By the way, you should read the chapter "Limitations of GDP to judge the health of an economy" in the Wikipedia page about GDP. It's fascinating. And it shows that we should remain humble with those numbers....

Edited January 25, 2009 by cclub75

[davyboy]

Come back 1998 (Jan/Feb) when the pound bought you nearly 90 Baht!!

[dave9988]

its not like its a perfect science.

[Priceless]

I'm a little bit out of my depth here, since I am not an economist by profession and my experience in the field is limited to micro economics as opposed to the macro that we are discussing here.

However, I can see the case for trying to eliminate the imports that are later re-exported as components of export products. I have a problem with eliminating all imports, though. This would mean e.g. that an increase in the world oil price (as we saw last summer) would decrease the export sector's importance to the Thai economy (by decreasing the net value, i.e. exports - imports)

Could you elaborate, please

It's not a vicious attempt from my side : I'm speaking about international definition. And logic.

GDP = Gross Domestic Product. Aka everything a country produces (goods and services). You would admit that when you import something... it's like a substitution : you're not going to produce it, right ?

Therefore, this is why within the GDP calculation, they take only net exports (exports minus imports).

Furthermore, what you import will show up into other GDP's components (for instance, you import a machine, but this machine is going to show up into the "Investment" component of GDP).

So to summarize : it's a matter of definition.

If you speak about real production, then exports is a large part of the GDP. If you speak on accounting terms, then it's less etc. Then we can speak about exports and employment... Or exports and taxes collections... There are many ways to gauge the importance of exports for the economy.

That's the beauty of economy : everybody can find what he wants into the data.

By the way, you should read the chapter "Limitations of GDP to judge the health of an economy" in the Wikipedia page about GDP. It's fascinating. And it shows that we should remain humble with those numbers....

I did not perceive your post as a 'vicious' attempt at anything, I just find the discussion interesting.

However, I think I now understand where we differ. You are looking at the 'accounting' in putting together the GDP figures (i.e. the definition of GDP). I am talking about the export/GDP ratio as a measure of the relative importance of exports for the total economy.

Imagine, if you will, a country where both exports and imports are equal to 50% of GDP. When calculating GDP, the net value of imports and exports will be 0. Imagine then that exports suddenly cease to exist. The effect on GDP will, all else equal, be a decrease of 50%. (The net value of exports - imports will go from 0 to -50% of the previous GDP.)

I am, at least in the context of this discussion, consequently not arguing that GDP is a very good measurement of the health of the Thai economy (in particular not GDP at official exchange rates). I am more interested in the risk that the high dependence on exports constitutes for the Thai economy. This risk is obviously higher than it would be if exports were equivalent to e.g. 10% of GDP

/ Priceless

[BigSnake]

Maybe this topic has already been discussed, but I can't find it.

I don't have a degree in, or even a basic understanding of world economics, but it just seems very strange that a developing country like Thailand has what appears to be one of the strongest currencies around. Our Aussie dollar has devalued by at least 30% against the Baht and I believe UK and USA currencies have taken similar losses. I'm sure the Thai economy must be paying the price, if not in exports, in tourism. Surely the Baht can't remain this strong against other currencies?

Yes it has been discuss here before, so one more time my humble opinion the Bank of Thailand (BOT) is at work.

[sorensen]

I'm a little bit out of my depth here, since I am not an economist by profession and my experience in the field is limited to micro economics as opposed to the macro that we are discussing here.

However, I can see the case for trying to eliminate the imports that are later re-exported as components of export products. I have a problem with eliminating all imports, though. This would mean e.g. that an increase in the world oil price (as we saw last summer) would decrease the export sector's importance to the Thai economy (by decreasing the net value, i.e. exports - imports)

Could you elaborate, please

It's not a vicious attempt from my side : I'm speaking about international definition. And logic.

GDP = Gross Domestic Product. Aka everything a country produces (goods and services). You would admit that when you import something... it's like a substitution : you're not going to produce it, right ?

Therefore, this is why within the GDP calculation, they take only net exports (exports minus imports).

Furthermore, what you import will show up into other GDP's components (for instance, you import a machine, but this machine is going to show up into the "Investment" component of GDP).

So to summarize : it's a matter of definition.

If you speak about real production, then exports is a large part of the GDP. If you speak on accounting terms, then it's less etc. Then we can speak about exports and employment... Or exports and taxes collections... There are many ways to gauge the importance of exports for the economy.

That's the beauty of economy : everybody can find what he wants into the data.

By the way, you should read the chapter "Limitations of GDP to judge the health of an economy" in the Wikipedia page about GDP. It's fascinating. And it shows that we should remain humble with those numbers....

I did not perceive your post as a 'vicious' attempt at anything, I just find the discussion interesting.

However, I think I now understand where we differ. You are looking at the 'accounting' in putting together the GDP figures (i.e. the definition of GDP). I am talking about the export/GDP ratio as a measure of the relative importance of exports for the total economy.

Imagine, if you will, a country where both exports and imports are equal to 50% of GDP. When calculating GDP, the net value of imports and exports will be 0. Imagine then that exports suddenly cease to exist. The effect on GDP will, all else equal, be a decrease of 50%. (The net value of exports - imports will go from 0 to -50% of the previous GDP.)

I am, at least in the context of this discussion, consequently not arguing that GDP is a very good measurement of the health of the Thai economy (in particular not GDP at official exchange rates). I am more interested in the risk that the high dependence on exports constitutes for the Thai economy. This risk is obviously higher than it would be if exports were equivalent to e.g. 10% of GDP

/ Priceless

Very interesting and informative post Priceless and cclub75. Great reading.

[SirPaul]

The way I see it is that at the moment the tourism now in Thailand is from earnings in 2008. When the tourism is from 2009 earnings we are likely to see the bhat fall, as tourism will drop for sure. The whole world is affected by this global credit crisis, from Russia to the USA. Thailand will be affected and the bhat will drop accordingly. Its just a matter of time.

As for the UK being rubished because the pound is week, there are actually benefits to a week pound, but when you are in Thailand you do tend to discount them as they are not in your interest.

[clausewitz]

Maybe this topic has already been discussed, but I can't find it.

I don't have a degree in, or even a basic understanding of world economics, but it just seems very strange that a developing country like Thailand has what appears to be one of the strongest currencies around. Our Aussie dollar has devalued by at least 30% against the Baht and I believe UK and USA currencies have taken similar losses. I'm sure the Thai economy must be paying the price, if not in exports, in tourism. Surely the Baht can't remain this strong against other currencies?

Yes it has been discuss here before, so one more time my humble opinion the Bank of Thailand (BOT) is at work.

Hilarious stuff. The thai baht has been sinking aginst the greenback for over a year now. Against the yen it has fallen over 35% in the 18 months.

[Priceless]

Maybe this topic has already been discussed, but I can't find it.

I don't have a degree in, or even a basic understanding of world economics, but it just seems very strange that a developing country like Thailand has what appears to be one of the strongest currencies around. Our Aussie dollar has devalued by at least 30% against the Baht and I believe UK and USA currencies have taken similar losses. I'm sure the Thai economy must be paying the price, if not in exports, in tourism. Surely the Baht can't remain this strong against other currencies?

Yes it has been discuss here before, so one more time my humble opinion the Bank of Thailand (BOT) is at work.

Hilarious stuff. The thai baht has been sinking aginst the greenback for over a year now. Against the yen it has fallen over 35% in the 18 months.

If you look at my earlier post (#25 above) you will see that the Baht has indeed weakened versus the JPY and the USD, but less so than e.g. the Philippines Peso, the Canada Dollar, the Indian Rupee, the Australia Dollar, the Russia Ruble and the UK Pound. In other words, the Baht has strengthened compared to all these currencies.

I, for one, have a hard time seeing any economic (not to mention political) fundamentals that can explain this.

/ Priceless

[dennis3506]

Maybe this topic has already been discussed, but I can't find it.

I don't have a degree in, or even a basic understanding of world economics, but it just seems very strange that a developing country like Thailand has what appears to be one of the strongest currencies around. Our Aussie dollar has devalued by at least 30% against the Baht and I believe UK and USA currencies have taken similar losses. I'm sure the Thai economy must be paying the price, if not in exports, in tourism. Surely the Baht can't remain this strong against other currencies?

Are we gonna ask this question everyday how the hel_l we know you just have to wait like we all do.

Don't read these posts if it doesn't interest you.

[roamer]

Patience.

This cycle has a long way to go and people who have posted on the rather alarming figures that show how great Thailand's dependence on exports is will find the following article interesting, its only 2 days old and a sign that attention is now starting to be paid to the peculiarity that is the Thai economy.

Cheaper Isn’t Better

As the global recession deepens, Asian nations can no longer export their way to prosperity.

By Ruchir Sharma | NEWSWEEK

Over the past few months economic trends across the world have broadly followed a similar logic: what goes up must come down. And then there's Thailand.

The Thai economy, which missed out on the growth boom of this decade, is now more than fully participating in the economic meltdown. In fact, Thailand looks set to be one of the few developing Asian economies to contract in 2009.

Thailand's travails are, in a way, the most extreme example of all that has gone wrong with the erstwhile East Asian tigers. While the problems with the United States economy have been well telegraphed for a long time now, the widely held view until a few months ago was that Asia was coming into its own in economic terms. The mere mention of the continent would conjure up images of booming growth, surging consumer spending and buzzing entrepreneurial energy.

But the reality is that outside of the sensational stories of China and India, domestic demand in much of Asia has been moribund, even during the golden era of high world economic growth from 2003 to 2007. That left the region as dependent as ever on exports. And now with global trade collapsing, the Asian model of "exporting your way to prosperity" stands well and truly broken.

For years the popular thinking among economists was that the fastest path to development was to ship out cheaply produced goods to the industrial world, while undervaluing one's currency to make those goods even less expensive in export markets.

The model worked well in the 1980s and '90s, when only a few Asian countries such as South Korea and Malaysia were playing the export field and the United States was in the midst of a consumption binge. But the export pie is finite, and cracks began to show up in the mid-'90s with the growing presence of China. The sharp devaluation of the Chinese currency in 1994 was cited as an important factor in the eventual outbreak of the region's economic crisis in 1997-98.

Back then, a slowdown in the export growth of countries such as Thailand resulted in trade deficits widening to unsustainable levels. But instead of rebalancing the economy to rely more on domestic growth, Thailand increased its reliance on exports in the aftermath of the late-'90s financial crisis. It was the easy way out, since the global economy was booming. Currently, exports form a larger part of the Thai economy than domestic consumption—a rather anomalous situation.

For all the firepower of its export machine, Thailand never regained the heady expansion of the 1980-96 era. While growth in emerging markets on average doubled from the 3.5 percent pace of 1980-2002 to 7 percent between 2003 and 2007, Thailand's growth downshifted to 5 percent, from 6 percent, during the same period. Foreign capital that funded the emerging-market boom bypassed Thailand for markets with better domestic-demand stories. More important, net exports contributed nearly half of Thailand's growth in recent years, making it particularly vulnerable to a global economic shock.

Some of Thailand's problems stem from the fact that the political class has spent the past few years engaged in a standoff over the controversial leadership of exiled ex-president Thaksin Shinawatra and his successors, rather than reforming the economy. Thailand has had three different prime ministers since September 2008, while other governments been focused on countering the economic meltdown.

Political masochism reached new heights in December 2008 when protesters seized Bangkok's airports, leaving 350,000 international tourists stranded just ahead of the peak tourist season. The aftereffect is apparent in Bangkok's deserted hotel lobbies and room-occupancy rates running well below 50 percent—in what was a global tourism hotbed. Analysts estimate that the airport protests along with the general slowdown in world travel could knock off nearly 2 percentage points from Thailand's growth in 2009.

Thailand's leaders need to get their act together. To move to the next stage of economic development, Thailand must unlock domestic demand by creating the right economic incentives for private enterprise to flourish within the country. Businesses cite the poor regulatory environment, cumbersome labor laws, long customs procedures and the poor education system as factors holding back local growth. Thailand itself has not seen an investment upturn since the 1997-98 crisis, leaving its infrastructure in need of a fix as well, something critical in boosting domestic demand.

Following the Asian financial crisis, Thailand, like many of its neighbors, focused on fortifying themselves against any external shock by building up massive foreign-exchange reserves and running current-account surpluses. The one positive result of such mercantilist policies is that much of the region is currently not stretched in credit and investment terms. The deep psychological scars from the 1997-98 financial crisis prompted consumers and companies in the region to pay down debt and stay away from taking any excessive leverage resulting in record-low loan-deposit ratios in the banking system.

But in the effort to protect themselves from any homegrown crisis, these countries ignored the potential negative effects from a falloff in global demand. Malaysia, for instance, continues to gear its economy mainly to manufacture electronic goods, which are now also produced in lower-cost economies including China and Vietnam. Meanwhile, the larger and relatively more advanced economies of South Korea and Taiwan have been unable to shift to a service-sector-oriented model that would allow them to grow at a faster rate. Little wonder that apart from Thailand, Korea and Taiwan are the other developing Asian economies set to contract this year.

History is littered with instances of countries getting stuck at some relatively low per capita income level due to their inability to implement reforms needed to transition to a higher plane. In contrast, Japan reached a much higher per capita income level of $30,000 in the early '90s before stagnating, even though exports as a share of GDP averaged only 10 percent through much of its strong growth phase, while in Thailand exports currently make up 60 percent of GDP and the per capita income level is just $4,000. Japan's greater success was due to the fact that in the 1970s and '80s its policymakers focused on creating the right conditions for a virtuous domestic investment and consumption supercycle.

The "exporting your way to prosperity" model served many of the East Asian economies well when U.S. demand was ripping ahead, and some of the large emerging markets, such as India and Brazil, were still only marginal players in the export markets. But now, with the developed world set for a protracted period of subpar growth and newly emerging economies including Vietnam and Bangladesh arriving on the global scene to get a piece of the action in the low-value-added export segment, it's time for economies like Thailand to seek new direction. Otherwise, they risk becoming just nice places to visit—and not even that when their restless people are blocking the airports.

Sharma is head of emerging markets at Morgan Stanley Investment Management.

© 2009

It takes time, years of investment, to move to a Plan B even if LOS had one which I doubt. There was a 14% drop in exports in Dec, wait until you see the figures for Jan. Western economies are suffering badly but are more diverse and will recover eventually but I doubt they will do so in time to prevent Thailand,s export based economy crashing.

And if anyone is in any doubt about just how far and fast those exports are dropping then take a look at this. Scary stuff.

Shipping rates hit Zero.

[Kerryd]

Hilarious stuff. The thai baht has been sinking aginst the greenback for over a year now. Against the yen it has fallen over 35% in the 18 months.

In the past 365 days, the baht has fluctuated from 31.62 to 36.14 to the USD. On xe.com a minute ago, the baht stood at 34.96 to the USD.

USD

1 minute ago the rate is 34.96.

1 year ago the rate was 31.62.

2 years ago the rate was 34.66.

3 years ago, the rate was 39.22.

Euro

1 minute ago the rate is 45.78

1 year ago the rate was 46.58.

2 years ago the rate was 44.96.

3 years ago, the rate was 48.15.

Aussie $

1 minute ago the rate is 23.13

1 year ago the rate was 26.41.

2 years ago the rate was 28.36.

3 years ago, the rate was 30.12.

GBP

1 minute ago the rate is 48.57

1 year ago the rate was 60.00.

2 years ago the rate was 70.43.

3 years ago, the rate was 70.81.

JPY (Yen)

1 minute ago the rate is 2.55 yen to the baht.

1 year ago the rate was 3.79.

2 years ago the rate was 3.34.

3 years ago, the rate was 2.87.

So yes, the Yen is one of the few major currencies the baht has lost value against recently, in addition to a small drop against the USD over the last year (having strengthened against it for the 2 years previous).

(data courtesy of Oanda, xrates, xe.com and others)

[davejonesbkk]

Nice article Roamer. So what next then? Sharma is saying that depending on a weak currency for exports isn't going to work anymore so what options does that leave the BOT with?

[Johpa]

Agree with that. But not all exports are solid items. A huge amount of "Invisible exports" come from the Uk, insurance, skilled services etc.

And what the entire west is finding out is that "invisible exports", AKA the service economy is like the emperor without clothes, it is a hallucination unless you have something tangible to back it up. It works as long as everyone else believes the myth. But ultimately, a service economy is an economy where everyone is employed washing someone else's clothing.

[Priceless]

Patience.

This cycle has a long way to go and people who have posted on the rather alarming figures that show how great Thailand's dependence on exports is will find the following article interesting, its only 2 days old and a sign that attention is now starting to be paid to the peculiarity that is the Thai economy.

Cheaper Isn’t Better

As the global recession deepens, Asian nations can no longer export their way to prosperity.

By Ruchir Sharma | NEWSWEEK

Over the past few months economic trends across the world have broadly followed a similar logic: what goes up must come down. And then there's Thailand.

The Thai economy, which missed out on the growth boom of this decade, is now more than fully participating in the economic meltdown. In fact, Thailand looks set to be one of the few developing Asian economies to contract in 2009.

Thailand's travails are, in a way, the most extreme example of all that has gone wrong with the erstwhile East Asian tigers. While the problems with the United States economy have been well telegraphed for a long time now, the widely held view until a few months ago was that Asia was coming into its own in economic terms. The mere mention of the continent would conjure up images of booming growth, surging consumer spending and buzzing entrepreneurial energy.

[...]

Sharma is head of emerging markets at Morgan Stanley Investment Management.

© 2009

It takes time, years of investment, to move to a Plan B even if LOS had one which I doubt. There was a 14% drop in exports in Dec, wait until you see the figures for Jan. Western economies are suffering badly but are more diverse and will recover eventually but I doubt they will do so in time to prevent Thailand,s export based economy crashing.

And if anyone is in any doubt about just how far and fast those exports are dropping then take a look at this. Scary stuff.

Shipping rates hit Zero.

These two articles show exactly why I am convinced that the Thai baht will fall rather dramatically within the next 6-12 months. Devaluing the currency (or just letting it fall) will not help much, but not doing it will be akin to suicide.

I put together a table (based on http://www.xe.com/ict/ ) that shows directly the change of exchange rates between the THB and a number of other currencies (as opposed to my earlier table, which was based on the USD):

Kerryd's post was excellent in that it stressed the importance of the time horizon. My table only looks at developments in the last year, but includes several more currencies.

I think it is rather clear that the THB has a lot of falling to do, if the country is to remain even remotely competitive.

/ Priceless

Edited January 26, 2009 by Priceless

[tw25rw]

Even if the Baht does have to weaken, don't expect it to be back to the level v sterling of a few years ago. The £ is deep in the sh1t and will be for a long while. This is like the 97 crisis in reverse but on a bigger scale.

[mommysboy]

Maybe this topic has already been discussed, but I can't find it.

I don't have a degree in, or even a basic understanding of world economics, but it just seems very strange that a developing country like Thailand has what appears to be one of the strongest currencies around. Our Aussie dollar has devalued by at least 30% against the Baht and I believe UK and USA currencies have taken similar losses. I'm sure the Thai economy must be paying the price, if not in exports, in tourism. Surely the Baht can't remain this strong against other currencies?

It's been discussed believe me. Go to Banking board.

There are 2 factors here the weakness of smaller currencies relative to the dollar and yen (Thailand follows the dollar), and the time lag between recession in the west and Thailand. In short, it is highly damaging to the Thai economy, perhaps disaster territory, but maybe there is very little that can be done.

Since many posters on this board are British, OZ, Scandanavian the effect is even more dramatic, but those that quote short term figures on the US dollar are out of bounds too (as the $ has strengthened only in the short term against the bt and by nowhere near as much as it's losses over a 2 year period).

[Priceless]

Maybe this topic has already been discussed, but I can't find it.

I don't have a degree in, or even a basic understanding of world economics, but it just seems very strange that a developing country like Thailand has what appears to be one of the strongest currencies around. Our Aussie dollar has devalued by at least 30% against the Baht and I believe UK and USA currencies have taken similar losses. I'm sure the Thai economy must be paying the price, if not in exports, in tourism. Surely the Baht can't remain this strong against other currencies?

It's been discussed believe me. Go to Banking board.

There are 2 factors here the weakness of smaller currencies relative to the dollar and yen (Thailand follows the dollar), and the time lag between recession in the west and Thailand. In short, it is highly damaging to the Thai economy, perhaps disaster territory, but maybe there is very little that can be done.

Since many posters on this board are British, OZ, Scandanavian the effect is even more dramatic, but those that quote short term figures on the US dollar are out of bounds too (as the $ has strengthened only in the short term against the bt and by nowhere near as much as it's losses over a 2 year period).

I (mostly) agree with your first statement, but your comment about the USD is way off (or a typo ) Actually the USD is ~4.4% stronger vs the THB than it was two years ago. (It is however ~10.2% weaker compared to three years ago, maybe that's what you were thinking about?)

/ Priceless

[kjhbigv]

You are approaching the question from the wrong side...as has be pointed out repeatedly...it's not that the baht is strong...it's that the Pound (and Aussie $, Canada $ and other currencies) so weak. The answer then is clear...the UK is on its way to national bankruptcy so its currency is loosing value by the minute and many of the other countries are mainly resource exporting economies (Rooland, Canada, So. Africa) and with the crash of commodities, their currencies are in the tank as well.

Another way to think of it is why does anyone outside a country need the currency issued by that country To buy goods or services that originate in those countries right...and when was the last time you bought anything that was made in the UK? They don't make anything the rest of the world wants/needs...therefore, no demand for their currency...therefore the price (exchange rate) of the currency drops against others.

There is no god. So stop worrying and enjoy your life.

Agree with that. But not all exports are solid items. A huge amount of "Invisible exports" come from the Uk, insurance, skilled services etc.

Not forgetting our worldwide banking and investment expertise!

[mommysboy]

Maybe this topic has already been discussed, but I can't find it.

I don't have a degree in, or even a basic understanding of world economics, but it just seems very strange that a developing country like Thailand has what appears to be one of the strongest currencies around. Our Aussie dollar has devalued by at least 30% against the Baht and I believe UK and USA currencies have taken similar losses. I'm sure the Thai economy must be paying the price, if not in exports, in tourism. Surely the Baht can't remain this strong against other currencies?

It's been discussed believe me. Go to Banking board.

There are 2 factors here the weakness of smaller currencies relative to the dollar and yen (Thailand follows the dollar), and the time lag between recession in the west and Thailand. In short, it is highly damaging to the Thai economy, perhaps disaster territory, but maybe there is very little that can be done.

Since many posters on this board are British, OZ, Scandanavian the effect is even more dramatic, but those that quote short term figures on the US dollar are out of bounds too (as the $ has strengthened only in the short term against the bt and by nowhere near as much as it's losses over a 2 year period).

I (mostly) agree with your first statement, but your comment about the USD is way off (or a typo ) Actually the USD is ~4.4% stronger vs the THB than it was two years ago. (It is however ~10.2% weaker compared to three years ago, maybe that's what you were thinking about?)

/ Priceless

Yes, thanks, incorrect research. You are indeed correct. What I think I meant was that the BT is not only overvalued against the Oz dollar for instance but also to the US dollar which it should be pegging.

[roamer]

Nice article Roamer. So what next then? Sharma is saying that depending on a weak currency for exports isn't going to work anymore so what options does that leave the BOT with?

Remarkably few. Its a bit of a red herring to look at how the baht is doing against currencies that are weak at the moment or conversely those that are stronger. If your looking towards the future then the economies of nations like Oz or UK will recover, their economies are diverse, a better educated and more flexible workforce, stronger governments etc, not perfect but enough to weather the storm. Thailand on the other hand seems to be a one trick pony, in the right place after the currency crisis of the 90's with a booming world economy ready to soak up the goods from the factories that the multi-nationals rushed to set up at the time. So when that world economy starts to get moving again so will LOS right ? Well maybe not, those same multi-nationals will use this period to retrench and look to other places where production costs are lower, governments more flexible in terms of extending the hand of welcome and certainly more stable. How long since you picked up a pair of brand name trainers or T shirt with a made in Thailand tag ? The vast majority of that business switched to Vietnam , Cambodia, Sri Lanka, let alone China years ago. Easier to do as the equipment and production facilities simpler to set up. A very large chunk of Thailand's exports are heavy machinery and electrical, automotive etc and its those companies that will be looking to retrench during this economic slowdown. Its not just about the baht, its also political and the political situation in Los remains as clear as the Chao Praya river. There has been no forward planning just a blind belief that the carousel would keep turning, even now with the music stopped and the fairground emptying there doesn't appear to be anyone listening.

[davejonesbkk]

Yes there seems to be more and more talk on BBC news and CNN now that this model of producing cheap products to export to the west and paying little attention to domestic markets is running out of steam now.....

[josh71]

You are approaching the question from the wrong side...as has be pointed out repeatedly...it's not that the baht is strong...it's that the Pound (and Aussie $, Canada $ and other currencies) so weak. The answer then is clear...the UK is on its way to national bankruptcy so its currency is loosing value by the minute and many of the other countries are mainly resource exporting economies (Rooland, Canada, So. Africa) and with the crash of commodities, their currencies are in the tank as well.

Another way to think of it is why does anyone outside a country need the currency issued by that country To buy goods or services that originate in those countries right...and when was the last time you bought anything that was made in the UK? They don't make anything the rest of the world wants/needs...therefore, no demand for their currency...therefore the price (exchange rate) of the currency drops against others.

There is no god. So stop worrying and enjoy your life.

I'm sorry, but I think that you are wrong What has happened is that a lot of the world's money has fled to 'safe havens', in particular the US dollar and the Japanese yen. This has resulted in almost all other currencies falling against these two:

(Source: http://www.xe.com/ict/ )

What is obvious from the table is that the Thai Baht has fallen a lot less than most other currencies. My personal guess is that the Bank of Thailand is supporting the currency (to save face ). My personal conviction is that we will see it fall drastically within 6-12 months, when exports really start to fall. Remember that exports account for 60-70% of Thailand's GDP.

/ Priceless

I think you are right.

I also think since thailand is so corrupt, they dont tell you the whole truth of the economy here as not to scare investors away. I think the truobles we see in the rest of the world is going to hit thailand harder because they have played a "lets pretend everything is fine" game for too long time.

I see empty streets. empty seats in the restaurents. empty hotels etc. ( i live in samui)

All shop owners say the same thing: no business. I was here 4 years ago, and this island was MUCH more busy than it is now. Thai baht will weaken in the future.......... no doubt about that.