Is There an Invisible Fundamentally Strong Thai Economy Supporting The Baht ?

[morrobay]

Can someone explain how with exports falling, infrastructure projects delayed, populist bankrupting policies (rice) , economic growth decreasing,household debt skyrocketing, tourist numbers reported down, and no effective government in place, the baht holds steady and is actually strengthening ? I see two possibilities: 1. A strong invisible economy. 2. The baht is controlled by the very wealthy and powerful who benefit from it being overvalued. If the answer is number two then what are the consequences economically?

Edited December 16, 2013 by morrobay

[paddyjenkins]

Could be just not a lot of foreigners had been able to previously bet on a strong baht, or few who are able to short to bet on a weak baht, or that thais haven't been buying imported goods as they hunker down...fx isn't always obvious...plus the perceived wisdom is that thailand is resilient, we need a bigger shock to break that cliche down a bit...could even be the central bank supporting the baht in this uncertain time, could even be seasonally strong due to tourist high season....many possibilities

[Naam]

the Baht exchange is clearly manipulated by aliens; i suspect by the Ferengis. we Klingons always knew that Ferengis have no honour!

[brit1984]

exchange rates are relative and determined based on variances in interest rates, inflation, trade balance, public debt, economic growth prospects and central bank foreign currency reserves - this data / info for thailand, and whatever other economies for which you are interested in the fx rate vs baht, are visible in the economist / ft / etc)

not really sure what you mean about wealthy people controlling the baht (and keeping it high) - i would assume they would prefer a weaker baht to ensure the competitiveness of the thai companies they own / control (although i guess a strong baht would help for those shopping trips to Paris) but anyway exchange rates are set by currency markets

[SheungWan]

The baht has not held steady. It has recently dropped ~ 10% against the $USD. What's the question? Is it that you think it should have dropped further?

[Bender]

we will start to get a clear answer this mid week, either it will drop further either it will come back an awful exchange rate like 6 months ago...

up to the FED decision...

[SheungWan]

we will start to get a clear answer this mid week, either it will drop further either it will come back an awful exchange rate like 6 months ago...

up to the FED decision...

or neither.

[orpheus454]

the Baht exchange is clearly manipulated by aliens; i suspect by the Ferengis. we Klingons always knew that Ferengis have no honour!

No, I'm quite sure it's the Illuminati outsourcing to the Templar Knights...

[Naam]

the Baht exchange is clearly manipulated by aliens; i suspect by the Ferengis. we Klingons always knew that Ferengis have no honour!

No, I'm quite sure it's the Illuminati outsourcing to the Templar Knights...

i have to admit that's is another valid assumption. then there are the Bilderbergs...

[recycler]

The most successful agricultural product of Thailand are woman! No cost and a steady source of foreign currency. Just do some conservative math and it's 1 billion US$ or more a month. Imagine how many big companies you need to generate this amount.

[AloisAmrein]

Thai Baht actually strengtening? Not true at all, just look at the exchange rates since Oct. Constantly loosing, and this will continue as long as the politic desaster goes on. Suthep and his gang are damaging seriously the welfare of this country.

[MrWorldwide]

The most successful agricultural product of Thailand are woman! No cost and a steady source of foreign currency. Just do some conservative math and it's 1 billion US$ or more a month. Imagine how many big companies you need to generate this amount.

I'm importing one from the PI.

Cost of Air Asia Flight - 4500THB

Import Duty+VAT - 800THB

2 nights at Nana Hotel - 3000THB

Courtship - PRICELESS

Whack that into your spreadsheet.

[bangon04]

the Baht exchange is clearly manipulated by aliens; i suspect by the Ferengis. we Klingons always knew that Ferengis have no honour!

No, I'm quite sure it's the Illuminati outsourcing to the Templar Knights...

i have to admit that's is another valid assumption. then there are the Bilderbergs...

Don't you mean the Vanderbilts, the Rothschilds and the Rockefellers?

[thaifamilyguy]

The questioner already knows the answer, no there isn't some fundamental strength to the Thai Baht.

I am afraid that the baht and the Thai economy is in a bubble fueled by debt and flight capital out of developed world looking for some positive return. The reason this particular bubble is not as obvious as '97, well, think of two says the bubble forms, one is at the top and the other is at the bottom: Thailand has been digging a hole (debt/liquid FDI) under its economy since 2009, that hole is much bigger than the 10% depreciation against the USD since its height in the Spring. There is also pressure upward, particularly in property, I remain amazed at the asking prices and new construction going on at the moment. When interest rates start upward, pressure is going to be applied to the bubble from below and when China slows pressure from above, if political risk slips into real economic risk (no sign that inevitable) then again pressure.

When it "pops" is anybody's guess but plenty of people are thinking in the next year.

Bottom line, however is that its a crazy world at the moment, fundamentals just not driving much, the entire idea of the US Fed "tapering" is tapering from what is already so NOT fundamental (http://en.wikipedia.org/wiki/Quantitative_easing) , in the meantime people have found ways to make money RELYING on government polices that are unsustainable and promised to end in 2014.

Will be very interesting to see just how much of the "gains" over the last couple years are wiped out by this time next year..or, once again, its a crazy world...

[Thormaturge]

Thailand produces large quantities of seafood, fruit and rice every year. These are what keep the country stable. It matters not what the politicians do, this stuff keeps coming out of the ground/water. Try to imagine a beach where traders are continually making money day after day selling icecream, lollipops, fizzy drinks and beer to the sunbathers, and in the corner is a Punch and Judy show which only the children are watching.

[h90]

The Thai economic is running as always.

The tourists are coming as always.

Not increasing as fast as before, so they Baht lost a little bit.

US and EU economic is not running well.

US and EU politics while stable is going in the wrong way.

So I don't see any reason why someone should run out of the THB into Euro or USD.

It is not about how Thailand is doing. It is how Thailand is doing in compare to the rest of the planet.

[belg]

you forgot

the billions of dollars of foreign investment that has left the country...

yes, overevaluate the baht will certainly profit some people who deceide what needs to be done to get richer & richer...

same as super overevaluated stock market

+ less taxes for the rich

should i say more ?

[FM505]

The most successful agricultural product of Thailand are woman! No cost and a steady source of foreign currency. Just do some conservative math and it's 1 billion US$ or more a month. Imagine how many big companies you need to generate this amount.

Sad but true... cash economy.

[MrWorldwide]

you forgot

the billions of dollars of foreign investment that has left the country...

yes, overevaluate the baht will certainly profit some people who deceide what needs to be done to get richer & richer...

same as super overevaluated stock market

+ less taxes for the rich

should i say more ?

Please dont.

[brianP]

World money economists study Thailand's baht for the unusual strength among coups and other normally crippling events. It bounds in the worst of times , but falters in blue bird weather.

[thaifamilyguy]

Just in case somebody thinks all opinions are equally authoritative.... (WSJ FROM NOV)

Thailand posted weaker-than-expected economic growth in the third quarter, and there is little to suggest its outlook will improve given the political risks, delays in government investment and lower auto sales.

The Thai economy grew 2.7% on-year in the third quarter, the National Economic and Social Development Board reported on Monday. That was below the expectations for 2.95% growth, according to The Wall Street Journal’s poll of economists, and the 2.8% gain in the second quarter.

In seasonally-adjusted on-quarter terms, the economy grew 1.3%, compared with expectations for a 1.8% rise. In the second quarter, the economy was flat, after contracting 1.6% in the first quarter.

The NESDB — the government’s economic planning agency — blamed the weaker-than-expected results on falling household spending and consumption after the expiration of the government’s First Car tax rebate last December resulted in a significant drop in auto purchases. Declining farm income and weaker consumer confidence also hurt consumption.

Growth was also hurt by a slowdown in construction, a fall in machinery and equipment investment, a slow recovery in global demand for Thai goods and sluggish shrimp production owing to an unresolved spread of a disease among shrimp stocks.

“We are surprised that both consumption and investment contracted in the third quarter. The momentum is clear and things are slowing down,” said Piyasak Manason, chief economist at Kiatnakin BankKKP.TH -0.63% in Bangkok.

In the wake of the third quarter data, the agency’s cut its official 2013 GDP growth forecast to 3.0% from 3.8%-4.3%, which prompted others to follow suit.

ANZ Research lowered its 2013 Thai growth forecast to 3.1% from 3.8%. Thailand’s Kasikorn Research Center also cut its projection to 3.0% from 3.7%, and TISCO’s Economic Strategy Unit cut its forecast to 3.2% from 3.5%.

The NESDB forecasts zero growth for Thai exports this year, which contracted 1.8% in the three-month period to September. The Commerce Ministry earlier this month slashed its forecast for this year’s export growth to 1% from 4% due to weak overseas shipments.

But even these less-rosy forecasts could prove optimistic. Economists worry that ongoing political tension and street rallies by tens of thousands of people protesting against Prime Minister Yingluck Shinawatra’s government and its amnesty law could snuff out the recovery.

“Political conflict in the country could hurt consumption and investment further while it remains to be seen how the recovery in overseas market will impact the situation in Thailand,” said Mr. Piyasak.

“Over a short term, political instability remains a downside risk for Thailand as it is not known how the situation will be resolved,” said Sutapa Amornvivat, chief economist at SCB Economic Intelligence Center. “The usual victim of conflicts in Thai politics has been private investment, which is already expected to be weak, and this risk is likely to continue into next year.”

Delayed state spending and implementation of the government’s investment plans, particularly the 350-billion-baht ($11 billion) flood and water management policies and the two-trillion-baht infrastructure investment projects, have been cited as reasons for the sluggish economy this year.

But the Thai government is remains optimistic it can pull out all the stops to boost future growth. The NESDB forecasts GDP growth of 4.0% to 5.0% for 2014 — the range that is in line with several forecasts.

“The government will push further with its spending plans, from the rolled-over budget of the previous fiscal year and the current year’s budget, which are hoped to help buoy the local economy considerably,” said Kittiratt Na-Ranong, Thai Finance Minister

[billd766]

Thai Baht actually strengtening? Not true at all, just look at the exchange rates since Oct. Constantly loosing, and this will continue as long as the politic desaster goes on. Suthep and his gang are damaging seriously the welfare of this country.

Actually that is not true at all.

Since it hit the top in April it has slowly but steadily been loosing against the world currencies and is now lower than it was at the turn of the year.

Attached is the £GBP v THB exchange rate I track at the KBank website for 2013 up until this morning.

Forex 2013 v1.xls

[Ulic]

For some unknown reason ratings agencies and analysts rate the baht and economy as strong. Can't understand

why but they do. Greece, cooked the books to join the EU, they continued to cook the books in get more agricultural

subsidies from the EU. It eventually does catch up. I understand Thai banks do the same keeping bad debts on the books

as full assets from the 97 collapse just as Nortel, and World Com did. Just not sure when there accounting schemes, rice

pledging schemes, and the systemic corruption will catch up to the baht, but it will eventually.

[dunque]

the Baht exchange is clearly manipulated by aliens; i suspect by the Ferengis. we Klingons always knew that Ferengis have no honour!

No, I'm quite sure it's the Illuminati outsourcing to the Templar Knights...

i have to admit that's is another valid assumption. then there are the Bilderbergs...

I think you can get a cream for that.

[Mudcrab]

the Baht exchange is clearly manipulated by aliens; i suspect by the Ferengis. we Klingons always knew that Ferengis have no honour!

No, I'm quite sure it's the Illuminati outsourcing to the Templar Knights...

i have to admit that's is another valid assumption. then there are the Bilderbergs...

Where's Dr Who when you need him. Sort this bunch of aliens out in no time.

[Costas2008]

recycler, on 17 Dec 2013 - 09:36, said:

The most successful agricultural product of Thailand are woman! No cost and a steady source of foreign currency. Just do some conservative math and it's 1 billion US$ or more a month. Imagine how many big companies you need to generate this amount.

You must be a very good investor in Thailands agricultural products!!!!!!

Why don't me and you contest the next elections, if they ever happen?

Me as PM, you as Finance minister.

Cracker administration!!!!!

[canman]

Thailand produces large quantities of seafood, fruit and rice every year. These are what keep the country stable. It matters not what the politicians do, this stuff keeps coming out of the ground/water. Try to imagine a beach where traders are continually making money day after day selling icecream, lollipops, fizzy drinks and beer to the sunbathers, and in the corner is a Punch and Judy show which only the children are watching.

Actually rice is fairly low on the list, seafood and fruit don't even make the top ten. 2 year old data but likely still relevant.

PERIOD : Jan – May 2011 VALUE : MILLION BAHT

1 Computer & Accessories 223,882.80 2 Auto part & Accessories 215,535.80 3 Gems & Jewelry 167,162.90 4 Rubber 165,245.60 5 Plastic 110,972.90 6 Chemical Products 102,657.00 7 Electronic Circuit 100,445.10 8 Rubber Products 98,162.50 9 Refine Fuel 95,989.60 10 Rice 86,830.40

[Thai at Heart]

Thai Baht actually strengtening? Not true at all, just look at the exchange rates since Oct. Constantly loosing, and this will continue as long as the politic desaster goes on. Suthep and his gang are damaging seriously the welfare of this country.

Everyone has been begging for a devaluation so now they have it.

Just check the bill next time you fill up the car to see what great value a devaluation can be.

[BusyB]

Professsional pride and the need to post correct information demands that I reply to this post.

First the Baht is not strengthening. When I was in LOS at the beginning of the year I was getting a teeth gnashing 38.5/EUR. Today I get over 44/EUR. In fact is has weakened since last night, when it was 44.16, to 44.23 this morning. This is to do with Suthep and the festering sore which has effectively blighted the country since post 1932. It scabbed over from time to time, usually in the wake of a coup or massacre, but it erupted again a few years ago and has suppurated since. (I can remember my first trip in 2003/2004 - 51/EUR! Ah those WERE the days my friends.)

Second the economy is not hidden. And if it is the world is in on the secret - Thailand generates two thirds of GDP with exports, and they are booming. It’s the biggest pick up truck maker in SEA for instance, with Ford and Toyota pounding ‘em out. Almost a million last year I think. That also needs a steel industry, electronics etc. Let’s not go in depth into agricultural products – they are less than 10 percent, but still a huge chunk. Yes growth and projected growth is down this year - but it's still at rates that make us Euros jealous.

And yes you are right in as far as LOS' potential is underdeveloped – it’s caught in the so-called middle income trap, where it has so far not proven possible to extend the benefits of industrialization to all the population. So it does appear weak at times. (Believe it or not, the posited high-speed railways are one attempt to break out of that trap.)

But as for hidden? I don’t know where you are in LOS OP, but even ignoring Bangkok Silom, Samut Prakarn etc., just take a bus ride from Hua Hin to BKK and pay attention to what’s outside the bus. Beginning a few miles north of Cha Am the road cuts through an entire sprawl of small, medium sized and in some cases major enterprises and industries. It continues all the way to Bangkok. Quite impressive. Without Suthep I suspect we’d all still be only getting around 40/EUR. Every cloud has a silver lining I suppose.

[wprime]

Without interference, a weak Thai economy leads to a strong baht. Contrary to popular farang belief, most investment capital in Thailand is sourced locally so a weak share market means a high demand for cash leading to a strengthening baht. That being said, as an export driven country, historically the BoT devalues the Baht to stimulate the economy.