Thai Baht Slide Triggers Inflation Worries

[DFCarlson]

There are few (if any) economists who think the USD will be weaker at the end of this year than stronger. The dollar is trading at historic lows against the AUD, NZD, Swiss France and Japanese Yen.

Should better and better news come out of the US over the next quarter or two (lower unemployment rate, better non-farm payrolls, stronger GDP etc) its inevitable the baht will weaken against the USD irrespective of what the BOT does.

Regrettably as a Brit I can see the exchange rate going in one direction for GBP/THB and thats down. More so in the case of the Euro.

As a result after 7 years of living here I'm off back to the UK as I can't justify the expense of living here any more when you consider the UK has free schools, free hospitals, family allowance - non of which Thailand has. A retirement visa that used to cost me less than £12,000 now works out at nearly £18,000 and I have to have that money locked in a Thai bank for 3 months so I'd need in excess of £20,000 in effect.

This wouldn't be too bad with a rising exchange rate but its not rising - its falling with little long term prospect of change.

Slim, if you have any amount of income (pension, annuity, ...) coming in you don't need to tie up 800,000 baht to obtain a new one-year permission to stay based on retirement. The other options are (1) to show an income of 65,000 baht or more per month (in this case you don't need to show any money in a Thai bank account) or (2) to show 800,000 baht total as a conbination of yearly income and money in the bank. For instance if you have a monthly income of 50,000 baht (equivalent) you would need to show 800,000 - 12 X 50,000 = 200,000 baht in a bank account in adition to the 50,000 baht monthly income.

I can't imagine that moving back to the States (in my case) or to the U.K. would be a better situation. Both places seem to be on a slippery slope to disaster.

Good luck whatever you decide to do!

[hansnl]

odd, one might think that if inflation is a concern, interest rates (and the baht) would go up? What do I know, I aint so phositicated financial analist

You are partly right that if interest rates go up then Baht should strengthen because more money flows in. But there is a massive outflow as foreign investors take the huge profits they've made over the last year or two. So they are selling the Baht and buying aother currencies. So this will push the Baht lower. It also depends what's happening with the other currencies. It's a very dynamic situation and not as strightforward as you suggest.

I would think that overthel onger term (next 10-30 years) that the Baht should strengthen. Europe, USA, etc are not going to grow as fast as Asia and other developing regions. But everything can change, so it's not set in stone, just a general trend. But there will always be ups and downs withing the longer trends.

The Baht, the Yuan and all the other Asian currencies could strenghten, indeed.

The Asian countries are mostly depending on export to the US, Europe, Australia, the higher exchange will also mean less export.

Maybe the growth of the western countries might be less fast as wanted, but do remember the culling of the import from Asia, already started in Europe, will mean that products will be manufactured in Europe again, based on price and quality.

Same result, less export for Asian countries.

Developing economies are depending on export to "developed" economies.

Developing economies do not and can not depend on exports to other developing economies.

[Somnambulist]

consider the UK has free schools, free hospitals, family allowance - non of which Thailand has.

I think you may have missed the boat on that one. Those are among the things the current UK gov't are trying to take out of the public purse in the name of 'austerity'. All the news coming out of Britain is that its going to be a very expensive and uncomfortable place to live for the next four years.

Bank of England chief Mervyn King: standard of living to plunge at fastest rate since 1920s

http://uk.finance.yahoo.com/news/Bank-England-chief-Mervyn-tele-204338037.html?x=0

[DickFarang]

There are few (if any) economists who think the USD will be weaker at the end of this year than stronger. The dollar is trading at historic lows against the AUD, NZD, Swiss France and Japanese Yen.

Should better and better news come out of the US over the next quarter or two (lower unemployment rate, better non-farm payrolls, stronger GDP etc) its inevitable the baht will weaken against the USD irrespective of what the BOT does.

Regrettably as a Brit I can see the exchange rate going in one direction for GBP/THB and thats down. More so in the case of the Euro.

As a result after 7 years of living here I'm off back to the UK as I can't justify the expense of living here any more when you consider the UK has free schools, free hospitals, family allowance - non of which Thailand has. A retirement visa that used to cost me less than £12,000 now works out at nearly £18,000 and I have to have that money locked in a Thai bank for 3 months so I'd need in excess of £20,000 in effect.

This wouldn't be too bad with a rising exchange rate but its not rising - its falling with little long term prospect of change.

The EUR has risen some 5 % to the THB the last couple of days.

[IvanDobsky]

Combine that with the fact that immigration is doing everything in their power to discourage foreigners from staying here, it's probably the best decision.

I just renewed my Non-O visa and I was treated as if I were some kind of dangerous criminal. I had to go back 4 times with additional documents that for some reason I never required before. I still have to go back for a 5th time to see if my application for extension has been accepted.

I'm not sure if I can handle going through this bull$hit for another year. Who knows what kind of ridiculous scenario they will dream up for next year.

I suspect that the extra documents were required because not all ex-pats have been upstanding members of the community. Our province has had issues even with relatively few foreigners. Bottom line: if you respect Thai law, respect people, and have the right bits of paper, you'll always be welcome.

[IvanDobsky]

odd, one might think that if inflation is a concern, interest rates (and the baht) would go up? What do I know, I aint so phositicated financial analist

was that spelling mistake made on purpose? (analyst) If so, it was very amusing.

[DickFarang]

odd, one might think that if inflation is a concern, interest rates (and the baht) would go up? What do I know, I aint so phositicated financial analist

was that spelling mistake made on purpose? (analyst) If so, it was very amusing.

No, the other one, “phositicated” (sophisticated, I guess), was made on purpose.

[IvanDobsky]

odd, one might think that if inflation is a concern, interest rates (and the baht) would go up? What do I know, I aint so phositicated financial analist

was that spelling mistake made on purpose? (analyst) If so, it was very amusing.

No, the other one, "phositicated" (sophisticated, I guess), was made on purpose.

I liked that too as I am also sophistimacated.....but financial anal(ist) has a certain 'ring' to it.....I'll get my coat

[TimTang]

Great! I just got a 1,333 Baht raise. Beers are on me.

Cool! Where can I find you tonight then, TimTang?!

I'll be at the "Why Not Boys" bar; so come on down!

Just joking!

[skorchio]

The fact that prices and the overall cost of living did not decline during the last 3-4 years while the baht got stronger indicates to me that when it weakens exactly nothing will change either. The rich get richer and the poor continue to be disenfranchised and have no rights. My dollar got weaker and my cost of living went up more than 30%. Prices for rice and veges won't change that much because oil is still around $80-90 as it has been for the last 4-5 years. Worst case, bring back that ailig water buffalo. You know him, he's the one that is located on the pecking order, well above all farangs!

In the last 3 years the price of oil has visited 38 dollars, and 148 dollars. Maybe the buffalo sits above you in the pecking....

[khaowong1]

I didn't see prices go down while the Baht was at a 13 year high against the dollar, so what's the big worry that the dollar gained almost a Baht back? When it was 42 Baht to a dollar, prices of things were less Baht then than now...

Yes, funny that, isn't it?

I was also expecting UK inflation to surge forward after the squib fell 25%, but it didn't.

There are strange forces at work in the financial world of smoke and mirrors.

I doubt we as sideline civilians, will ever know exactly how the financial world really works. It's all smoke and mirrors for sure.

[moskito]

I can appreciate that a slide in the Baht will make oil more expensive in Baht terms and that will have a marginal effect on inflation.

But over the last few years that the Baht has been strengthening, I have seen no decrease in the price of imported goods, so a slight weakening of the Baht should have no effect there.

Right, when the Barrel Oil was at a high of 160 USD we paid about 40 Baht for a Liter Gasoline. After it was down to 80 we had to pay 32 Baht....guess there is something wrong here.

Everything is more expensive and I never get only 1 Bottle Oil, 1 pound of Sugar and no Coconut Milk in a Supermarket like Lotus or Big C. It is not that there is no Oil and sugar, they just

hold it back to raise the prices.

Anyway, still to many cars on the streets of Phuket (:

[starman_tom]

Great! I just got a 1,333 Baht raise. Beers are on me.

I got a 12000 B raise!

Woot Woot!

[cbc]

Regrettably as a Brit I can see the exchange rate going in one direction for GBP/THB and thats down. More so in the case of the Euro.

As a result after 7 years of living here I'm off back to the UK as I can't justify the expense of living here any more when you consider the UK has free schools, free hospitals, family allowance - non of which Thailand has. A retirement visa that used to cost me less than £12,000 now works out at nearly £18,000 and I have to have that money locked in a Thai bank for 3 months so I'd need in excess of £20,000 in effect.

This wouldn't be too bad with a rising exchange rate but its not rising - its falling with little long term prospect of change.

I am slightly more positive about the EUR for the moment. It looks like Asia and India are buying into EUR debt as an alternative to the USD, but who knows what is about to pop out of the woodwork next. But the visa does not "cost" you 18,000 Quid, you only have to show that money for three months, and during this time it will earn interest and has also gained against the GBP over the last couple of years as well.

Earn interest you say .What a joke ! Have you checked lately and seen how much interest is paid to a foreigner's account ?It's a joke,the interest they pay.

[hhgz]

"It wasn’t too long ago that KBank predicted Bath to go up to 26/$. I guess these expert used Monkey Theory "

I had the same thought when the TV monetary experts predicted that the THB would slide to 60/USD in 2010.

[Naam]

I am slightly more positive about the EUR for the moment. It looks like Asia and India are buying into EUR debt as an alternative to the USD, but who knows what is about to pop out of the woodwork next. But the visa does not "cost" you 18,000 Quid, you only have to show that money for three months, and during this time it will earn interest and has also gained against the GBP over the last couple of years as well.

India buying debt 12? looks like you exceeded the 12 yesterday. confess! how many?

[webfact]

'Biggest threat' to the economy

By Achara Deboonme,

Seetalavajit Sabayjai

The Nation

BOT chief warns interest rates may have to maintain an upward trend if inflation casts a shadow over growth

Lingering uncertainties, particularly regarding the domestic political turbulence that is again brewing, are posting major challenges for the economy, Bank of Thailand Governor Prasarn Trairatvorakul said yesterday.

"The political factor will have a more significant impact [than foreign-exchange volatility and the inflation threat]. The general election and its results could pose uncertainties. However, I remain hopeful that it will go well and the results will be endorsed. Political action for a single purpose could have a widespread and unique impact," he said.

Disparity between advanced and emerging economies will ensure a continued shift in fund flows and greater volatility in foreign-exchange rates, he said. Meanwhile, growing demand could lead to higher commodity prices, and inflation will be pulled up by demand and driven by higher costs.

To Prasarn, inflation will become a major risk for the economy, while other economic factors are less worrisome.

In these circumstances, he sees the need for further economic balancing and strengthening.

As economic growth is back on the normal track with expansion of 3 to 5 per cent expected this year, against 8 per cent in 2010, the central-bank chief reiterated the need for further interest-rate normalisation for the sake of long-term economic stability.

Despite the private sector's complaint of higher financial costs following rate hikes, he said that if inflation got out of hand, interest rates would inevitably rise further and that would affect private companies and consumers.

Therefore, he added, the central bank must act accordingly to contain inflation, in line with economic conditions.

He declined to specify the appropriate policy interest rate, but said it must be in line with the economic outlook, inflation, and external as well as internal risk factors.

Every Bt1 appreciation against the US dollar would move the consumer price index up by about 0.15 percentage point. The index could rise due to the recent weakening of the baht, but only by relatively little, he said, as Thailand's consumer-price calculation basket contains only 15 per cent of imports.

"Balance is the heart of monetary policy. As the economy has returned to the normal state [after 8-per-cent growth last year], interest rates must be balanced accordingly. There is a necessity for further rate normalisation for some time, to bring the rates back to normal conditions," he said.

On foreign-exchange policy, Prasarn insisted that rates would be allowed to move in line with the market mechanism and economic fundamentals.

To cope with greater volatility, he said the central bank had come up with a master plan, which is focused on relaxing rules for overseas investment and hedging among small and medium-sized entrepreneurs. As a last-ditch measure, capital-control measures are also in place, in line with what is required for "irregular" situations.

The governor declined to specify what would be the most stringent weapon in the central bank's arsenal, saying only that it was something that it had done before.

In 2006, the Bank of Thailand imposed a 30-per-cent capital-reserve requirement, which was lifted two years later.

"We're confident that Thailand is ready to cope with this. We have the safety belts in place," he said.

Prasarn said the bank had set two main objectives for this year: macroeconomic stability and economic strengthening. The macroeconomic goal covers the stability of prices, monetary and fiscal policies, while the strengthening goal is the responsibility of both the private and public sectors.

While financial institutions must maintain prudent business operations, other companies must work on competitiveness enhancement as well as maintaining flexibility to cope with volatility, he said, adding, "All parties involved are significant in rendering these objectives, not just the Bank of Thailand. The Finance Ministry needs to maintain fiscal discipline and efficiency, through maximum efficiency in budgeting for the strength of the overall economy."

Amid inter-related economies and fluctuating international markets, financial institutions need to have the ability for proper and rapid adjustment, the governor said.

The central bank supports the institutions in operating their businesses despite the current economic uncertainty. It focuses on promoting each institution to have an international risk-management system, prudent criteria for loan extension and a capital-adequacy ratio that satisfies Basel III requirements.

Last year, their average non-performing loans stayed relatively low at 3.6 per cent, while loan growth came in at 11.3 per cent.

Aside from monitoring loan concentration in specific sectors and property prices, macro-prudential measures like the new-loan-to-value ratio have been employed to strengthen financial institutions, Prasarn said.

The central bank also promotes expansion of risk-management tools among operators in the light of possible greater financial volatility, helps small and medium-sized enterprises to get easier access to funding and supports financial institutions in the provision of knowledge of products and services.

-- The Nation 2011-01-27

[ukfool]

odd, one might think that if inflation is a concern, interest rates (and the baht) would go up? What do I know, I aint so phositicated financial analist

Lol, Nice one !

[Robby nz]

Certainly, you ment those 'INSANE' self protective laws.

Foreigners can't buy land - what are we going to do - take it somewhere on a plane..??

It would seem more reasonable that the Bangkok snobs don't want any Nouveau Riche, former farmers joining the country club...

Got to agree with the Thailand policy of not letting foreigners buy land.

NZ has let them buy up land and tracts have been bought and closed to access to NZers.

Hay there were whinges not long ago that the Baht was to high now it drops there are more.

Can never keep everyone happy.

[philhal2]

Sign of a free market economy, when the money rolls in the locals cry.,

"How good we are."

When the money rolls out the locals cry.

''It's those nasty foreign investors taking THEIR money away that undermines our economy.

Relax those biased inane self protective laws, then foreign investment will be stable.

Till then capricious whims on the part of investors will control what passes for the Thai Economy.

Allowing any currency to be traded and floated , where America can and has controlled other economies while supporting there own is foolish . China sent America the message when it refused to float its own currency . As an Aussie I have watched our own currency value depleted and bandied about at the whims of investors ( America ) since it was floated in the 60's . Ask yourself why currency values were seperated from Gold values ? My thoughts are that the Americans ran out of gold but got control of foreign oil deposits and they fight wars today to ensure they maintain control over foreign oil supplies . To me it seems foolish that we have allowed our currencies to be tied to such a volatile and manipulated product such as oil . The sooner there is a world movement to put it back to something more solid and tangible like GOLD the better for everyone , except perhaps America . Or even better tie a currencies valuation to the national wealth and or GDP of each country .

then we might see a lot more stability and fairness across the world with regard to prices and inflation . Producers and manufacturers will then get value for their product , those who use poorer countries ie , Vietnam to produce cheap goods to resell in their own countries will no longer benefit from this as the Vietnamess Dong and other Aisan currencies would have a far more realistic value and worth . Manipulation by foreign powers would not be so easy and America could no longer keep its cheap Asian SLAVES in the POOR HOUSE manufacturing car parts , computer components and electronics goods for virtually nothing . And its useless saying that these countries will take their manufacturing elsewhere , because they cant do it in their own countries and dont have a labour source who are capable .

[powderpuff]

Commodities have been going crazy the past few years due to the worthless $ policy.

Aussie is a one trick pony who exports a shedload of commodities.

And you are surprised that the Aussie $ is strong? mmmmm curious.

[spidermike007]

The fascinating thing about inflation, is that there are two kinds. First, there is the real inflation that is driven by an increasing costs of commodities. Then there is the recent Thai kind of inflation, where the local people use external forces to drive prices up, and of course once those external forces disappear, the prices remain up. We are seeing historic inflation in food prices here in Samui. Difficult to find oranges for less than 70 baht per kilo. This has happened within the past 6 months of so. It has been awhile since I have seen watermelon for under 20 baht per kilo, though I realize it is not the top growing season now. Same with vegetables, bananas, etc., etc. I presume some of this is real, but alot of it seems manufactured.

[philhal2]

Certainly, you ment those 'INSANE' self protective laws.

Foreigners can't buy land - what are we going to do - take it somewhere on a plane..??

It would seem more reasonable that the Bangkok snobs don't want any Nouveau Riche, former farmers joining the country club...

Got to agree with the Thailand policy of not letting foreigners buy land.

NZ has let them buy up land and tracts have been bought and closed to access to NZers.

Hay there were whinges not long ago that the Baht was to high now it drops there are more.

Can never keep everyone happy.

Foreign ownership of land is self destructive for any nation especially poorer ones . Sudden purchases of large quantities of land , housing or agricultural , will raise prices quickly increasing costs associated with agriculture and other producers . Higher housing costs as wealthy foreigners buy more and pay higher prices without regard to the locals or what they are doing . Foreign companies are allowed to operate and can form Thai pty ltd companies and do contribute in this way through taxes etc but also create issues by paying Western employees far higher wages than the Thai people and again do not see that it creates issues . If Western Employees are to be employed in Thailand then consideration needs to used with regard to wages etc , Paying higher wages to the Thai employees must be carefully considered with regard to knock on effects and I think closer ties with the Government and the economical situation is best for locals . Selling your land to foreigners is akin to giving away your rights . I am an australian and today to much of our land has been virtually given away to foreign mining companies , foreign agricultural producers and wealthy owners of domestic and rural land . Not a good scenario for the locals nor is it for our Governments who reap a pittance in royaltis and taxes from their sell out to foreign companies . Thailand is smart and is controlling this in an intelligent way for the benefit of Thais . More power to them .

[philhal2]

Commodities have been going crazy the past few years due to the worthless $ policy.

Aussie is a one trick pony who exports a shedload of commodities.

And you are surprised that the Aussie $ is strong? mmmmm curious.

Commodities are the true worth of any Nation . It is no longer plausible to expect to get away with smoke and mirror tricks as America has for many years . America can no longer buy and sell other nations and control their currencies and their economies for the sole benefit of America . Values of a nations assets and its productivity is the deciding factor in todays markets . Emerging economies that have crawled out from beneath the Western pressure that has sucked them dry and enslaved them as cheap labour in the automotive and electronics industries are suddenly the only countries with stable and growing economies . Perhaps because they are the only countries that actually produce goods and products to sell . So if your not manufacturing at competitive prices or dont have commodities to sell , BASICALLY YOU'RE SCREWED , So now we might respect nations where people still work or have Resources that aren't open to exploitation .As an Aussie I think its a good turnaround where we now get paid for our resources and other countries who process those resources also get paid for what they produce . The middleman has been bypassed , cant pay their bills and no longer gets away with enslaving cheap labour to process cheap commodities for them to make Squillions from Good luck America , but its time to get a job and do some real work You can not survive by playing the middleman ( or thinking you are god's gift ) anymore . Yes the aussie $ is strong and will be even stronger if it is tied to an acceptable worldwide commodity such as gold , remove all currency valuations from the american global control via OIL ,when currencies are no longer floated and it becomes illegal to buy and sell currencies in the open market which allows unethical and immoral manipulation by a few wealthy people or countries then we will see the true worth of each Nation on its own merits . More power to Aussie and Asian economies

[steelepulse]

Certainly, you ment those 'INSANE' self protective laws.

Foreigners can't buy land - what are we going to do - take it somewhere on a plane..??

It would seem more reasonable that the Bangkok snobs don't want any Nouveau Riche, former farmers joining the country club...

Got to agree with the Thailand policy of not letting foreigners buy land.

NZ has let them buy up land and tracts have been bought and closed to access to NZers.

Hay there were whinges not long ago that the Baht was to high now it drops there are more.

Can never keep everyone happy.

Foreign ownership of land is self destructive for any nation especially poorer ones . Sudden purchases of large quantities of land , housing or agricultural , will raise prices quickly increasing costs associated with agriculture and other producers . Higher housing costs as wealthy foreigners buy more and pay higher prices without regard to the locals or what they are doing . Foreign companies are allowed to operate and can form Thai pty ltd companies and do contribute in this way through taxes etc but also create issues by paying Western employees far higher wages than the Thai people and again do not see that it creates issues . If Western Employees are to be employed in Thailand then consideration needs to used with regard to wages etc , Paying higher wages to the Thai employees must be carefully considered with regard to knock on effects and I think closer ties with the Government and the economical situation is best for locals . Selling your land to foreigners is akin to giving away your rights . I am an australian and today to much of our land has been virtually given away to foreign mining companies , foreign agricultural producers and wealthy owners of domestic and rural land . Not a good scenario for the locals nor is it for our Governments who reap a pittance in royaltis and taxes from their sell out to foreign companies . Thailand is smart and is controlling this in an intelligent way for the benefit of Thais . More power to them .

If foreigners are buying land in OZ and NZ,who's selling it to them :? They're not just taking it by force are they?

[Berkshire]

Certainly, you ment those 'INSANE' self protective laws.

Foreigners can't buy land - what are we going to do - take it somewhere on a plane..??

It would seem more reasonable that the Bangkok snobs don't want any Nouveau Riche, former farmers joining the country club...

Got to agree with the Thailand policy of not letting foreigners buy land.

NZ has let them buy up land and tracts have been bought and closed to access to NZers.

Hay there were whinges not long ago that the Baht was to high now it drops there are more.

Can never keep everyone happy.

Foreign ownership of land is self destructive for any nation especially poorer ones . Sudden purchases of large quantities of land , housing or agricultural , will raise prices quickly increasing costs associated with agriculture and other producers . Higher housing costs as wealthy foreigners buy more and pay higher prices without regard to the locals or what they are doing . Foreign companies are allowed to operate and can form Thai pty ltd companies and do contribute in this way through taxes etc but also create issues by paying Western employees far higher wages than the Thai people and again do not see that it creates issues . If Western Employees are to be employed in Thailand then consideration needs to used with regard to wages etc , Paying higher wages to the Thai employees must be carefully considered with regard to knock on effects and I think closer ties with the Government and the economical situation is best for locals . Selling your land to foreigners is akin to giving away your rights . I am an australian and today to much of our land has been virtually given away to foreign mining companies , foreign agricultural producers and wealthy owners of domestic and rural land . Not a good scenario for the locals nor is it for our Governments who reap a pittance in royaltis and taxes from their sell out to foreign companies . Thailand is smart and is controlling this in an intelligent way for the benefit of Thais . More power to them .

Strongly agree with both Robby and Phil regarding foreign land ownership. Allowing foreigners to own land unfettered would be extremely short-sighted, incredibly destructive to the long term health of the nation and its citizens, and the ultimate sell-out by any government official who would allow such a thing. Things are fine just the way they are.

[Darkman]

Can someone predict when the baht will get back to somewhere's around 68 to the pound? That would suit me nicely.

[Robby nz]

If foreigners are buying land in OZ and NZ,who's selling it to them :? They're not just taking it by force are they?

The point isnt who is selling the land but who [The Govt] is allowing the sale.

In the part of NZ where I come from large farms have been bought up by overseas interests and turned into forestry.

The result of this is that the gates have been closed, the workers laid off and the income the land used to produce stopped. with a predictable impact on the local economy.

In other parts of the country, one in particular a US company bought a large farm that was a popular hunting and fishing place, hunted there myself.

They then closed it to locals and turned it into a hunting and fishing lodge for their clients at prices no local could afford.

These are only two of numerous examples where overseas ownership has hurt NZrds'

[MaiChai]

slim is right; its cheaper to retire in the uk than Thailand. I knew this would happen eventually, what surprises me is how quickly it has happened. I think it fair to say Asia has had a meteroic rise in terms in terms of economic growth. There is huge desparity between costs in Asia, and Thailand could be squeezed by cheaper countries in the future.

I think it makes it clear there is no safe bet retiring in other countries.

[coma]

Looks like there will be some nice opportunities to buy some baht for the right price over the next 6 to 12 months.