Thai economists: Baht plunge 'a short-term issue'

[webfact]

ECONOMY
Plunge in the baht 'a short-term issue'
Business Desk
The Nation

Economic fundamentals strong, currency may rise again: analysts

BANGKOK: -- Thai economists and financial authorities say the sharp depreciation of the baht is likely to be a short-term phenomenon and foresee stability returning when the economy picks up, as economic fundamentals remain strong.

Commerce Minister Niwattumrong Boonsongpaisan said yesterday that the government would not interfere with the Bank of Thailand's work in stabilising exchange rates.

After a brainstorming session with the prime minister and Finance Minister Kittiratt Na-Ranong, Niwattumrong said the heart of this issue was to ensure stability and alignment with regional currencies. He said it would take a month or two to see if the baht's decline would boost Thai exports and whether the export target of 7-7.5 per cent would be revised.

Two forces are speeding the depreciation of regional currencies: the United States' plan to scale back its asset-buying or quantitative-easing (QE) measure because of improving economic health; and the worse-than-expected economic data within the region. Investors are shifting money back to the US.

The baht passed 32 to the dollar yesterday, a level unseen since September 2010, and economists say it could strengthen if the local economy shows improvement in the second half.

Tak Bunnag, head of Bank of Ayudhya's treasury group, said foreign investors had shifted investment out of Asia for some time. So if the Federal Reserve really acts to taper its QE, the baht should not fall much more, or it could even rise again.

In the year to date, the baht, at 32.12, has weakened by 4.8 per cent against the US dollar. Thailand's current-account deficit in the first half stood at 1.9 per cent.

Tak attributed part of the depreciation to the National Economic and Social Development Board's downward revision in the economic forecast on Monday. GDP figures roughly weigh 30 per cent when foreign investors make a decision, he said. This year's growth estimate for Thai gross domestic product was cut on Monday to 3.8-4.2 per cent after slowing in the second quarter to 2.8 per cent.

Kampol Adireksombat, senior economist at Tisco Securities, said the baht had fallen beyond its fundamentals.

His view was that the Thai economy should improve in the second half. If exports pick up, Thailand could show a balanced current account or even a slight surplus. In a worst-case scenario, a deficit of less than 1 per cent of GDP was anticipated. In these scenarios, it was likely the baht would strengthen against the dollar to around 31.5 later this year.

While urging the Bank of Thailand to restore exchange-rate stability via use of foreign reserves of US$170 billion (Bt5.45 trillion) or so, Kittiratt insisted yesterday that the economy remained strong. Even with slowing growth in the second quarter, investment was on track and would keep unemployment low.

To boost the economy in the second half, aside from pushing for the disbursement of the state budget and 20 measures backed by the Cabinet on August 6, the government would resort to no new measures, said Kittiratt.

"All the measures are not to boost the economy in the short term, but to invest in what we should and what will create long-term value," he said. All state agencies should also lend a hand in boosting consumer and investor confidence.

He said that in the short term, the macroeconomic picture remained satisfactory. The baht's depreciation was not worrying, in light of low inflation, as that would cushion negative impacts on importers.

-- The Nation 2013-08-23

[waza]

"After a brainstorming session with the prime minister and Finance Minister Kittiratt Na-Ranong,"

That would have been a long awkward silence ..

Edited August 22, 2013 by waza

[NongKhaiKid]

Was it a brainstorming or a " lie of the day " session ?

[MaxLee]

Was it a brainstorming or a " lie of the day " session ?

You said it yourself, it's a secret behind closed doors meeting to discuss how to delude the public with more white lie strategies....

[Ricardo]

"a short term issue" ... famous last words !

[NongKhaiKid]

A lot is being said in various media outlets, including international, about the situation and how foreign investors are moving their money out, not only from Thailand.

What we will never hear about is how many rich Thais are hedging against the future by moving money to their overseas accounts just in case.

[Neilly]

Economic fundamentals strong, currency may rise again: analysts

Nothing like stating the obvious Sherlock

[Naam]

nothing more amusing than reading the Thai bashers' know-it-all comments

[Baerboxer]

"After a brainstorming session with the prime minister and Finance Minister Kittiratt Na-Ranong,"

That would have been a long awkward silence ..

Indeed - from the same economic geniuses that brought the rice scheme and "little white lies" strategies among others.

Still, what's all the fuss - their overseas accounts will be worth more now, and they can buy up things more cheaply. So every cloud has the silver lining.

Guess the silence would have been broken by the loud Skype calling ring tone.

[alant]

at last an indication that the baht will devalue,

"Thai economists and financial authorities say the sharp depreciation of the baht is likely to be a short-term phenomenon"

[Baerboxer]

nothing more amusing than reading the Thai bashers' know-it-all comments

Not everyone is a Thai basher - some just seem to pick on those poor souls trying to act as a government.

[ggold]

"All the measures are not to boost the economy in the short term, but to invest in what we should and what will create long-term value," he said. All state agencies should also lend a hand in boosting consumer and investor confidence.

Lets see,

there's the rice scheme!

there's the water management scheme!

there's the high speed rail scheme!

need I say more?

[jacko45k]

I would like to think they are wrong, selfishly.

[sscsamui]

Drop Baht Drop.... and Keep on Dropping....

[Thai at Heart]

This guy was pleading for a devaluation only 3 months ago. So they cut interest rates. Now he has what he wants. Give it 3 weeks and watch oil pump prices kick off.

They have not liberalised the markets in Thailand so that when the currency strengthens, cheaper imports feed into the market, but when it weakens, oil moves very fast and their useless policies on energy conservation and the lack of integrated transport policies means that higher oil prices feed into prices in Thailand very fast.

[spermwhale]

"After a brainstorming session with the prime minister and Finance Minister Kittiratt Na-Ranong,"

That would have been a long awkward silence ..

I can see Yingluck's input now: "Maybe we need more malls? Or wait... I know... How about I make some more trips abroad to boost tourism? Say Paris? Milan? PLEASE PLEASE let me go so I don't have to work!!"

[spermwhale]

Drop Baht Drop.... and Keep on Dropping....

I am with you brutha!

[Pi Sek]

I wonder which 'economists' came up with this snippet. The Thai Baht has depreciated for one reason - the laws of supply and demand, i.e. the market equilibrium.

Quantity of exports sold have gone down due to higher cost prices (although this does not necessarily mean lower revenue)*. The demand curve for exported rice has certainly gone down due to price of related goods (e.g. Indian, Vietnamese and American rice) and concerns over quality of product. The same could be argued against another main Thai export product, tourism.

* Anyone notice that, in the last paragraph, inflation is low yet one of the biggest concerns at the moment is rising cost of living? The Thai Ministry of Finance really needs to get real about this.

And high Baht rates over the last decade have made imports cheaper than they historically were. One common complaint with Thai mentality is that they give up easily, especially when countered by something that might look like hard work, so it's reasonable to assume that Thai businesses choose not to compete with these cheaper imports, especially if their quality is of reasonable standard.

This of course would suggest the Balance of Payments (total exports minus total imports) has gone down. The GNP (the next national income progression after GDP) would therefore be lower - so this might not be as "short term" as our Commerce Minister would have us believe... another "white lie" as per his predecessor Boonsong? On the other hand, this is not bad news for those here with assets in the West.

[spermwhale]

nothing more amusing than reading the Thai bashers' know-it-all comments alt=tongue.png width=20 height=20>

Are you reading the same thread? There is no Thai bashing! They are bashing the incompetent trio that had the meeting. They don't represent all Thais.

[PhilipCook]

weaker baht helps exporters of locally produced products compete globally. in the beginning of the year it was the war of words between BOT and KNR when the baht was felt to be too strong thereby hurting exports. at that time the stronger baht was helping thai tourists just in time for the great songkhran ecsape abroad. its all of 3 baht(low 29, high 32). lets settle for 30.5 and call it a year.

[Thai at Heart]

I wonder which 'economists' came up with this snippet. The Thai Baht has depreciated for one reason - the laws of supply and demand, i.e. the market equilibrium.

Quantity of exports sold have gone down due to higher cost prices (although this does not necessarily mean lower revenue)*. The demand curve for exported rice has certainly gone down due to price of related goods (e.g. Indian, Vietnamese and American rice) and concerns over quality of product. The same could be argued against another main Thai export product, tourism.

* Anyone notice that, in the last paragraph, inflation is low yet one of the biggest concerns at the moment is rising cost of living? The Thai Ministry of Finance really needs to get real about this.

And high Baht rates over the last decade have made imports cheaper than they historically were. One common complaint with Thai mentality is that they give up easily, especially when countered by something that might look like hard work, so it's reasonable to assume that Thai businesses choose not to compete with these cheaper imports, especially if their quality is of reasonable standard.

This of course would suggest the Balance of Payments (total exports minus total imports) has gone down. The GNP (the next national income progression after GDP) would therefore be lower - so this might not be as "short term" as our Commerce Minister would have us believe... another "white lie" as per his predecessor Boonsong? On the other hand, this is not bad news for those here with assets in the West.

Thailand relies on a huge amount of imports to produce its exports. Other than agriculture which still relies on fertilisers for inputs and fuel for machinery and shipping, imports are brought in, stuff is manufactured and assembled and exported.

So, believing that that a drop will quickly close the trade deficit is not so simple. Imports now go up in price so costs of production for export will go up.

[billd766]

Another if, buts and maybes story.

IF I won the lottery I would be rich,

BUT as I don't play the lottery I won't.

MAYBE I should start to play then maybe I will be rich.

[Naam]

nothing more amusing than reading the Thai bashers' know-it-all comments alt=tongue.png width=20 height=20>

Are you reading the same thread? There is no Thai bashing! They are bashing the incompetent trio that had the meeting. They don't represent all Thais.

i rephrase:

nothing more amusing than listening to some poor frustrated Farangs judging Thai politicians from their "no pot to piss in" perspective.

[waza]

nothing more amusing than reading the Thai bashers' know-it-all comments alt=tongue.png width=20 height=20>

Are you reading the same thread? There is no Thai bashing! They are bashing the incompetent trio that had the meeting. They don't represent all Thais.

i rephrase:

nothing more amusing than listening to some poor frustrated Farangs judging Thai politicians from their "no pot to piss in" perspective.

This is obviously coming from a happy contented Thai that's too big to fail.

[Kabayo66]

nothing more amusing than reading the Thai bashers' know-it-all comments alt=tongue.png width=20 height=20>

Are you reading the same thread? There is no Thai bashing! They are bashing the incompetent trio that had the meeting. They don't represent all Thais.

Actually, they were elected by a majority vote to represent all Thais, weren't they? However, people shouldn't be concerned about who they represent, but rather who they are working for.

[Noistar]

nothing more amusing than reading the Thai bashers' know-it-all comments alt=tongue.png width=20 height=20>

Are you reading the same thread? There is no Thai bashing! They are bashing the incompetent trio that had the meeting. They don't represent all Thais.

Actually, they were elected by a majority vote to represent all Thais, weren't they? However, people shouldn't be concerned about who they represent, but rather who they are working for.

What you say is correct in a Democracy, but this is a democratic government which has been seen to say 'no investment if your constituency didn't vote PT'.

More and more evidence that the government represents the party, not the country and its people.

Apathy reigns - PT will get re-elected whatever

[1Ping1]

Let's not forget the big picture. China's economy versus US economy is key factor right now. Smaller world view is Thailand has a sh##$ pot of semi rotting rice its trying very hard to dump on any sucker willing to buy.

Baht, cross my fingers will slide some more and sure as hell do want rotten rice dumped elsware and China to continue to have problems. Both should weaken baht further and God knows I not want to eat rotten rice or a healthy China whose nu one goal is to control all of SEA.

[1Ping1]

Should have made clear, weaker baht makes easier to dump rice and China's attention on jacking Japan and Philippines around w war ships should stand out as aggression meant only to piss someone off. World does not need that. Literally fighting, contesting a few fricken hunks of rock.... Why...because they can....

[1Ping1]

Yeah....... More global view. But <deleted> its a global economy.

[Baerboxer]

nothing more amusing than reading the Thai bashers' know-it-all comments alt=tongue.png width=20 height=20>

Are you reading the same thread? There is no Thai bashing! They are bashing the incompetent trio that had the meeting. They don't represent all Thais.

Actually, they were elected by a majority vote to represent all Thais, weren't they? However, people shouldn't be concerned about who they represent, but rather who they are working for.

No they weren't actually. Look up the % of eligible voters who voted, and the % of votes of that % that were cast in favour of PTP. See if you think the answer is a majority or not.