Thai analysis: Exporters' wish for a weaker baht unlikely to be fulfilled

[elgordo38]

I'm no economist and always welcome input from those better qualified to explain but why when it would help exports is a de-valuation resisted ?

Is it just a matter of face, LoS can boast about having a strong Baht and to hell with the consequences ?

I agree saving face is a big issue here especially with a change in the government. Outside forces could still come into play. A high baht has to have a bearing on tourism and exports. Oil will not stay low forever.

[Thai at Heart]

I'm no economist and always welcome input from those better qualified to explain but why when it would help exports is a de-valuation resisted ?

Is it just a matter of face, LoS can boast about having a strong Baht and to hell with the consequences ?

The answer is the fore-mentioned swelling account surplus. Exports (autos/fish), tourism, domestic consumption is greater than imports (oil). I'm simplifying of course. It's not broken so don't fix it. Devaluation would negatively impact rice farmers and families and government wants political stability. Status quo viewed as best option.

Yes, as I've been saying for the last 4 or 5 months, its pretty much all about the Oil imports - paying less than they were paying last year leaves Thailand with a trade surplus.

But to answer the question, why they don't devalue is simple. It won't change the underlying reasons for the appreciation. That is, the trade surplus.

In such a situation, what a devaluation would mean is that the economy gets flooded with newly printed Baht and then you end up with inflation. So prices of everything go up. What little benefit exporters get from the weaker currency, every other Thai will pay the price for that through higher prices. Is that what you want?

Exactly.

I remember the exporters screaming that they couldn't export at 28.5 a few years back. Now they have 32.5, and lo and behold, they can't grow exports at this rate either. No country devalued itself to wealth, ever.......

[Guest]

ANALYSIS

Exporters' wish for a weaker baht unlikely to be fulfilled

SO UNTRUE !!!

The international markets are in US Dollars, not in Thai Baht. I am in doing international business for over 30 years.

Only the European community uses their own currency within the Eurozone and when doing business with the UK they are using the Pound Sterling.

Everywhere in the world they are using the US Dollar. Or is Thailand now the world leader that they are using the Thai Baht for doing business???

The title must be:

Exporters wish a stable baht.

The Thai Baht has been very stable according to the US Dollar in the last 5 years. In April 2013 THB/USD was at the lowest at 28.61500 THB/USD.

So have export companies been calculating that the USD would weaken even more??? Plain stupid. Where was their margin ???

I have heard Thai (with Masters degree) say that if you have 100 products and you have 1% profit, you would make 100% profit. Yeah sure, on only on 1 product !!!

They don't have brains. And if they can find brains, they are in a calculator.

Link: http://www.xe.com/currencycharts/?from=USD&to=THB&view=10Y

(1) "I have heard Thai (with Masters degree) say”... may i ask, what was their Master's Degree in? I always laugh at this "has a Master's in ... catch all ... mentality. I have friends with PhD's ... in literature, who would have to think long and hard about any financial, profit calculation, or really, just math and percentages in general.

(2) That being said, we are very lucky to have your condescending negative "Thai's are stupid" posting to set the record straight!

Or DO we?

You have stated "...that if you have 100 products and you have 1% profit, you would make 100% profit. Yeah sure, on only on 1 product !!!"

Ummm ... WRONG

If a person had 100 products with a cost of $1, the cost of the bundle of products would be $100. If each product produced a 1% profit (one cent) , that would be 100 cents … $1.

So yes, the profitability of that bundle would be %1.

However, this certainly does not mean that it is 1% for One Product!

I am not sure what you are importing / exporting … but I would like to buy 100 Units of it, and give you the profit on only one unit.

Call any time … we have operator’s standing by … and they have Master’s Degrees!

Please, when you go out on your Thai Bashing outings, try to be more careful and get YOUR side of the story correct.

[Guest]

I don't know one Thai who owns his/her car. Sure a fewer older cars are owned but the bank seems to own the rest. Thais (and I swear this is not Thai bashing), seem to save little, nor want too. All my younger extended family live for the day. Nothing gets saved. Big TVs stuffed into the typical small apartment for example. The latest cloths etc. Everything has be new and sparkling. If there is another crash it will be tragic I'm sure. And then the blame game will start.

I don't know one (Insert any industrialized country in the world, and especially the USA) who owns his/her car. Sure a fewer older cars are owned but the bank seems to own the rest. Thais (and I swear this is not Thai bashing), seem to save little, nor want too. All my younger extended family live for the day. Nothing gets saved. Big TVs stuffed into the typical small apartment for example. The latest cloths etc. Everything has be new and sparkling. If there is another crash it will be tragic I'm sure. And then the blame game will start.

[alfieconn]

ANALYSIS

Exporters' wish for a weaker baht unlikely to be fulfilled

SO UNTRUE !!!

The international markets are in US Dollars, not in Thai Baht. I am in doing international business for over 30 years.

Only the European community uses their own currency within the Eurozone and when doing business with the UK they are using the Pound Sterling.

Everywhere in the world they are using the US Dollar. Or is Thailand now the world leader that they are using the Thai Baht for doing business???

The title must be:

Exporters wish a stable baht.

The Thai Baht has been very stable according to the US Dollar in the last 5 years. In April 2013 THB/USD was at the lowest at 28.61500 THB/USD.

So have export companies been calculating that the USD would weaken even more??? Plain stupid. Where was their margin ???

I have heard Thai (with Masters degree) say that if you have 100 products and you have 1% profit, you would make 100% profit. Yeah sure, on only on 1 product !!!

They don't have brains. And if they can find brains, they are in a calculator.

Link: http://www.xe.com/currencycharts/?from=USD&to=THB&view=10Y

Makes no difference to a Thai Company if all International markets are based in US and they receive payment in US Dollar, they still have convert to Thai Baht at some stage, so what ever currency they are paid in they would still prefer a weaker Baht !

[micmichd]

For export you'd prefer a weaker THB, and for imports you'd prefer a stronger THB because then you have to buy USD.

Export and import well balanced you might want a stable THB.

[Balance]

It would seem that the decision to leave the Thai Bhat alone is being driven by low oil prices and the BOT's primary job of looking out for those who own the country.

It would also be interesting to know how many jobs were located in exporting firms and how many jobs have been lost since the last high point. At some point, rising unemployment will, or should, make a difference in the political matrix. The export driven companies will also have to start worrying about loosing skilled and semi-skilled labor, which will be difficult to get back when things pick up.

Edited April 27, 2015 by Balance

[Thunderbirds20]

Why the powers that be want a strong Baht is beyond me! It makes everything Thailand exports more expensive on the world market and also makes tourist visits more expensive causing many to look elsewhere for a better value for their holiday dollar! ... but this is Thailand where logic and common sense do not exist!

[Nobb]

Thailand must adjust it,s baht to be competitive in the world market. If not other Asian countries to buy were the cost are lower because they pay less wages to there workers. The price of oil went up this week as oil production has lowered. Wake up Thailand before it is to late!

[thailandforumaddict]

Fake baht value just as everything else in the country, all fake.

[mommysboy]

I think Thailand has quite a chunk of dollar denominated debt. This us easier to service with a favourable exchange rate.

But I would suggest the elite are benefiting more and more and simply couldn't give a toss about the economy.

[micmichd]

I get my pensions in EUR, so it's less in THB due to currency exchange rates.

Pls tell a good reason why it should be Thailand's duty to solve this problem.

[Cardiff1963]

I work for an international company here and thailand was used for the cheap labour and comparitive skilled labour here compared to other places in asian/india... Its now getting to the point where other markets are a lot more cheaper to get the same job done.

Not sure how much longer we will keep our opperation here. There is already talk of moving to India... Now with the strong baht its hard to argue..

Sent from my c64

Longing for the day you cheapskate, exploiters have nowhere left to run.

[ThomasHOL]

http://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

Well if its only about the quantity of foreign currency reserves that enables BOT to sustain a too high baht ( buying baht )

then unfortunately it looks like they can continue doing so for a long time.

If there are other economic factors that can prevent BOT from sustaining high baht then what are they ? Of course given that the almost 157 billion is correct.

Unfortunately I think you got it a bit backwards when it comes to accumulation of foreign currency. Generally a strong currency tends to accumulate foreign currency. This is because investors want to buy baht and to buy them they pay with foreign currency and therefore the reserve rises. Right now Thailand’s reserves are rising so they are not buying Baht.

This in itself is a sign of a economy that is stronger than many others so any thought of devaluating the currency will require very tough measures. They would have to cut the interest rate quite hard and that would give people incentive to loan more and that would in term increase the inflation. Generally you don’t want to stimulate the economy to much in a time economic growth. The Policy Interest Rate is already 1,75% and was reduced in March from 2%

But if a country really want to devalue their currency they could cut the interest rate to 0 or even negative. Here in Denmark the interest rate from the central bank is -0,75% and this Is needed in order to keep the fixed exchange rate to the Euro.

[Guest]

I work for an international company here and thailand was used for the cheap labour and comparitive skilled labour here compared to other places in asian/india... Its now getting to the point where other markets are a lot more cheaper to get the same job done.

Not sure how much longer we will keep our opperation here. There is already talk of moving to India... Now with the strong baht its hard to argue..

Sent from my c64

Longing for the day you cheapskate, exploiters have nowhere left to run.

RIGHT ON Mr Cardiff1963.

@Wow64 ,, "Wow" is right ... hey ... if you need help packing and a ride to the airport .. let us know!

And don't let the door hit you in the A$$.

OMG ... can you imagine living in the Kingdom, and then having to move to India?

You SO deserve that! Go for it !!! 555

[Traveling Sailor]

The dollar remains strong and will for the next few months. Must remember that we live in a financial world that speculates..., often recklessly..., so these moves (or non-moves) by TH have little bearing in the near term because the baht is pegged (mostly) to the dollar.

So either way, we should see the baht devalue to the USD in coming weeks. I think it will get back to and hover around 33THB.

I sure hope so!

[tphut]

Dont forget it is the pour farangs that will stay away or move like you say you will

The well off will still come and stay here at the well off is the ones how use money, the pour dont so not really a lose to thailand to get rid off the cheap charlies

Actually the strong baht discourages tourism and expats. I live here in my wife's house, but we are planning to move in my house in Italy (where we can live a life more comfortable and cheaper than here) and stay there enjoying trips around Europe.

[losworld]

I'm no economist and always welcome input from those better qualified to explain but why when it would help exports is a de-valuation resisted ?

Is it just a matter of face, LoS can boast about having a strong Baht and to hell with the consequences ?

The answer is the fore-mentioned swelling account surplus. Exports (autos/fish), tourism, domestic consumption is greater than imports (oil). I'm simplifying of course. It's not broken so don't fix it. Devaluation would negatively impact rice farmers and families and government wants political stability. Status quo viewed as best option.

Yes, as I've been saying for the last 4 or 5 months, its pretty much all about the Oil imports - paying less than they were paying last year leaves Thailand with a trade surplus.

But to answer the question, why they don't devalue is simple. It won't change the underlying reasons for the appreciation. That is, the trade surplus.

In such a situation, what a devaluation would mean is that the economy gets flooded with newly printed Baht and then you end up with inflation. So prices of everything go up. What little benefit exporters get from the weaker currency, every other Thai will pay the price for that through higher prices. Is that what you want?

Not entirely that simple. Yes imported products would go up but this would also increase sales and market share for competing Thai products as well as encourage enterprise domestically in new sectors. And you are ignoring the Tourism/retirement sector. A weaker baht would be the best thing for tourism and Thais intentionally downplay the importance of this key sector. If a weaker currency is so bad why are all the western countries in a race for the bottom when it comes to their currency?

[lostoday]

Fake baht value just as everything else in the country, all fake.

You may exchange real gold for baht at todays rate of exchange any time you want to. I guess you think the gold is fake too?

[lostoday]

I think Thailand has quite a chunk of dollar denominated debt. This us easier to service with a favourable exchange rate.

But I would suggest the elite are benefiting more and more and simply couldn't give a toss about the economy.

Thailand 26% GDP external debt. UK 406% GDP external debt.

[wow64]

I work for an international company here and thailand was used for the cheap labour and comparitive skilled labour here compared to other places in asian/india... Its now getting to the point where other markets are a lot more cheaper to get the same job done.

Not sure how much longer we will keep our opperation here. There is already talk of moving to India... Now with the strong baht its hard to argue..

Sent from my c64

Longing for the day you cheapskate, exploiters have nowhere left to run.

RIGHT ON Mr Cardiff1963.

@Wow64 ,, "Wow" is right ... hey ... if you need help packing and a ride to the airport .. let us know!

And don't let the door hit you in the <deleted>.

OMG ... can you imagine living in the Kingdom, and then having to move to India?

You SO deserve that! Go for it !!! 555

The cheapskate expoiter I work for exployes many thousands of thais... You probably have one or 2 of our products in your computer.

I was giving an example of how a high baht is going to cost thai jobs.. Its costing more now for our product to be made here.. Which also gets made in china... They used to make our low end units... In 3 months time they are taking on units that used to only be made in thailand.

Omg moving to India would suck... I will stay in Thailand and look after the smaller operation if that ever happens.

Sent from my c64

[pmugghc]

Why the powers that be want a strong Baht is beyond me! It makes everything Thailand exports more expensive on the world market and also makes tourist visits more expensive causing many to look elsewhere for a better value for their holiday dollar! ... but this is Thailand where logic and common sense do not exist!

Because everything Thailand imports gets more inexpensive, like oil, components for cars that are later exported etc. What they want is stability!

[Jim walker]

I cant complain sold my Pattaya condo a couple of weeks ago and transferred my money back to UK so got a good rate for buying cheap pounds.

[lostoday]

Why the powers that be want a strong Baht is beyond me! It makes everything Thailand exports more expensive on the world market and also makes tourist visits more expensive causing many to look elsewhere for a better value for their holiday dollar! ... but this is Thailand where logic and common sense do not exist!

Because everything Thailand imports gets more inexpensive, like oil, components for cars that are later exported etc. What they want is stability!

Seems obvious does it not? Buy raw materiel to make a product that benefits from expensive baht. The only exceptions are fishing, rubber and like industries where the raw materiel is Thai.

Since Thailand manly exports (86% ) manufactured goods the expensive baht makes imported materials cheaper to buy.

[useronthenet]

Carry on with this policy and the economy will go down the drain. Exporters are already feeling the brunt of a drop in orders. It's almost common knowledge that the currency is being manipulated at the expense of everyone else. Household debt is at an all-time high, and banks are still lending out as if it was no tomorrow, Eventualy something will give. Another 1997 crash perhaps ?

[superal]

I believe that a lot of money can be made on the currency markets if you are in the know or have an insight/crystal ball but does anyone understand what are

the indications or triggers that would cause a currency devaluation to be imminent ? Are there proven typical historical events that lead to a weakening of a

currency albeit self imposed or forced by global markets .

[lostoday]

I believe that a lot of money can be made on the currency markets if you are in the know or have an insight/crystal ball but does anyone understand what are

the indications or triggers that would cause a currency devaluation to be imminent ? Are there proven typical historical events that lead to a weakening of a

currency albeit self imposed or forced by global markets .

For a long time I have thought that Naam was actually George Soros.