Thailand's 'Super-Baht' May Be Too Strong For Its Own Good

[webfact]

Thailand's 'Super-Baht' May Be Too Strong For Its Own Good

By Sunil Jagtiani

 

-- Strong currency can sting as exports make up 70% of economy

-- Since crisis, Thailand improved regulations, trade position

 

BANGKOK: -- Two decades ago, Thailand became ground zero of the Asia financial crisis, when its government scrapped a dollar peg with the baht, a devaluation that unleashed a wave of speculative attacks on other regional currencies and shook the global economy. Now, the baht is again posing challenges for Thailand--but this time because it may be too strong.

 

Near-record foreign exchange reserves and a current-account surplus have burnished the baht’s appeal as a regional haven and attracted foreign capital to Thai bonds. The currency is the strongest performer in Southeast Asia in the past year. The super baht, however, is a complication for policy makers trying to nurture a recovery in an economy where exports account for about 70 percent of gross domestic product.

 

The jitters caused by the baht reflect Thailand’s wider post-crisis task: how to shift from a low-cost manufacturer of hard disks and car parts to more advanced industries that can boost incomes further.

 

Full story: https://www.bloomberg.com/news/articles/2017-06-29/thailand-copes-with-super-baht-20-years-after-currency-crashed

 

-- Bloomberg 2017-06-30

[tonray]

Most here would welcome a weaker baht against our home currencies. Every little bit helps.

[whatawonderfulday]

1 minute ago, tonray said:

Most here would welcome a weaker baht against our home currencies. Every little bit helps.

Well I guess if were ever possible to find the true state of the current Thai reserves then the baht would most likely plummet I suspect due to the plundering of the nations resources by the ruling Junta.  That aside then it was good for us when it was 76 baht to the GBP, almost half its current value . Can not see it crashing to those lows again unless their is a major crisis or a civil war, but hey TIT.  But a baht/GBP/US exchange rate of 60 and 45 respectively would be welcome I am sure 

[Bangkok Barry]

Just a couple of months ago there were stories of the coffers being almost empty, with a rise in VAT being mooted as one way to help raise more funds. Now we read reserves are near an all-time high. What happened since a couple of months ago to take Thailand from near bankruptcy to having record funds? Answer: nothing but poor, irresponsible and uninformed reporting.

[topt]

8 minutes ago, Bangkok Barry said:

nothing but poor, irresponsible and uninformed reporting

You mean from some TVF posters..............

[JAG]

Just a couple of months ago there were stories of the coffers being almost empty, with a rise in VAT being mooted as one way to help raise more funds. Now we read reserves are near an all-time high. What happened since a couple of months ago to take Thailand from near bankruptcy to having record funds? Answer: nothing but poor, irresponsible and uninformed reporting.

Maybe someone (not a journalist, and quite possibly clad in green) has dictated that the has changed?

 

[halloween]

18 minutes ago, JAG said:

Maybe someone (not a journalist, and quite possibly clad in green) has dictated that the has changed?

 

How do you dictate to the world currency markets? They couldn't even dictate the price of rice.

Edited June 30, 2017 by halloween

[BuaBS]

What is it with these stupid articles about a too strong Baht ? Can't they understand currency graphs ? There is nothing super about the Baht.

 

[Ricardo]

39 minutes ago, Bangkok Barry said:

Just a couple of months ago there were stories of the coffers being almost empty, with a rise in VAT being mooted as one way to help raise more funds. Now we read reserves are near an all-time high. What happened since a couple of months ago to take Thailand from near bankruptcy to having record funds? Answer: nothing but poor, irresponsible and uninformed reporting.

 

Or perhaps people confusing the government's finances, where they've been running a fiscal-deficit for several years, with the large reserves which the BoT are sitting on ?

[Lemonltr]

1 hour ago, Bangkok Barry said:

Just a couple of months ago there were stories of the coffers being almost empty, with a rise in VAT being mooted as one way to help raise more funds. Now we read reserves are near an all-time high. What happened since a couple of months ago to take Thailand from near bankruptcy to having record funds? Answer: nothing but poor, irresponsible and uninformed reporting.

I am no economist but it is easy to confuse various accounts. The Government were trying to reduce the budget deficit, ie the difference between taxes raised and government spending. I believe that the separate reserves also include foreign investment in bonds.

The current account surplus ie the difference between value of exports and imports in always in positive which helps keep the baht high. Also keeping it high is that ( according to figures given) government borrowings are relatively low at around 40% of gap.( UK and France around double that)

One answer would be to lower import taxes to run a current account deficit but Orwell's Animal Farm comes to mind Exports (four legs) good Imports ( two legs) bad.

Exports at 70% of gdp is unsustainable and the excellent Bloomberg article explains why.

As I said I'm no economist so if I am wrong please shoot me down gently.

 

[Searat7]

1 hour ago, Bangkok Barry said:

Just a couple of months ago there were stories of the coffers being almost empty, with a rise in VAT being mooted as one way to help raise more funds. Now we read reserves are near an all-time high. What happened since a couple of months ago to take Thailand from near bankruptcy to having record funds? Answer: nothing but poor, irresponsible and uninformed reporting.

The coffers are almost empty in Thailand as I recall BUT foreign currency reserves are supposedly healthy. Every time they announce a new program I wonder where the money will come from.  The Junta will not be leaving the new government in a good situation if and when elections are finally held.

[spidermike007]

I am no financial expert, but I believe foreign exchange reserves, and cash surplus, are two completely different things. It is true. The fools in charge are running the economy into the ground, and have gone through nearly all of the long term cash surplus reserves. But, for some reason, foreigners are still interested in Thailand as an emerging market, with regard to stocks and bonds, hence the foreign exchange reserves being so high. It tends to prop up the currency, despite all of the issues here.

 

I too am hopeful the baht begins a long slide toward it's true value, sometime soon. 

 

Any insight into the power of the baht, at this moment in time?

[FritsSikkink]

3 hours ago, BuaBS said:

What is it with these stupid articles about a too strong Baht ? Can't they understand currency graphs ? There is nothing super about the Baht.

 

Don't you understand there are more currencies in the world than the USD alone?

[FritsSikkink]

1 hour ago, Lemonltr said:

I am no economist but it is easy to confuse various accounts. The Government were trying to reduce the budget deficit, ie the difference between taxes raised and government spending. I believe that the separate reserves also include foreign investment in bonds.

The current account surplus ie the difference between value of exports and imports in always in positive which helps keep the baht high. Also keeping it high is that ( according to figures given) government borrowings are relatively low at around 40% of gap.( UK and France around double that)

One answer would be to lower import taxes to run a current account deficit but Orwell's Animal Farm comes to mind Exports (four legs) good Imports ( two legs) bad.

Exports at 70% of gdp is unsustainable and the excellent Bloomberg article explains why.

As I said I'm no economist so if I am wrong please shoot me down gently.

 

Don't be scared most of the posters won't understand it anyway.

[Just1Voice]

I find it somewhat amusing that back in February the banks (Kasikon specifically) were sending out dire predictions that the baht would be 38 to the dollar by the end of the year. Have a feeling that unless something drastic changes, that's not going to happen. 

 

[maewang99]

totally ignorant.....

I was told by a ROBINS IR that a 'strong baht' would be bad for their business.... Baw Maw Jaw Robinson's Dept Store was below 9 baht a share then, about ten years ago.  it then went to 40 something and beyond.... 

Thailand is the LOS... but I think if there is more purchasing power.... post 1997... and a tank full of US Treasury debt already more than sufficient... there can be more smiles.

that's not so bad.  but it has limits.... but not 30 something. we don't get to a Strong Baht until we are in the twenties against what will soon enough be a Trumped Down Dollah. if they (McConnell etc.) don't make major cuts to Medicaid and Medicare now.... the fiscal debt situation in the USA means that when you look at a long term chart of US debt.....World War 2 won't even be seen on the chart anymore......

.... only a 'hockey stick' will be visible. with WW2 a non event.. that's a whopper if you are at all familiar with what that chart still looks like.. even today.

and that only portends ONE thing for the US Dollah.





 

Edited June 30, 2017 by maewang99

[Cadbury]

6 hours ago, webfact said:

exports make up 70% of economy

I have often wondered what makes up the Thai economy, particularly how much of it is classified as the "shadow" economy.

 

Curious to find out I came across this very interesting article. This 2015 story describes Thailand as one of the world leaders in  "shadow" economies". 

http://investvine.com/thailands-shadow-economy-among-biggest-globally/

 

Here is an extract:

 

Friedrich Schneider, an economist at Johannes Kepler University in Austria who has done studies on underground economies all over the world, estimates that Thailand’s shadow economy accounted for 40.9 per cent of real GDP in 2014, which would have been more than $155 billion in illicit revenue generated. If only taxed by the general 7-per cent value added tax, the government could have brought in almost $11 billion for state coffers, 12 times more than it has earmarked for desperately needed water management projects for 2015 and 2016 to cope with droughts and floods that alternately batter the country.

 

Another extract:

Bloomberg was recently inspired to a feature on Thailand’s shadow economy, pointing at the ubiquitous informal food stalls, street vendors and repair shops during the day and watering holes, street “bars” and open-air hooker venues in the night. These are, of course, all formally illegal businesses. No one pays tax for it, no one is licensed, no one is documented. They just have to pay off certain local officials to run their businesses and the police to “rent” space on the sidewalk. Money that disappears in pockets of people who constitute a food chain of corruption that stretches up to the highest echelons.

 

 

 

 

 

 

[ELVIS123456]

I am certainly in favor of a lower Baht - and if this means things will head in that direction, then that is a good thing. If TAT can get onto this and agree a lower Baht will increase tourism, and Exporters also get on board, maybe it will happen. Mercs will cost more, but hey, maybe 'they' will understand that more incoming money/tourists means more money in the long run - hope so.  Compared to when I first came to Thailand, my home currency has gone down by 20%.  If it goes back up again I might buy a place - maybe others will too?  Maybe more money will come into Thailand?  Come on Thais (Govt) - do the math. 

[maewang99]

there is a ceiling on the Baht.....

as long as the words "academic" and "intellectual" apply to anyone who merely reads anything more 'sophisticated' than a comic book or tabloid newspaper....

 

and the new library in Bangkok is a place to take a nap or play with a cellphone... but doesn't hold a candle to Amazon....

 

a strong baht stops somewhere around 25, I would guess, wouldn't you?


...  assuming McConnell and the Tea Party etc are unsuccessful on major cuts to US entitlements such as Medicaid..... 

60 to 80 million boomers... both sexes... are no longer entering their prime (which we fondly label as the Reagan Revolution) but are entering their 60's and 70's... and our docs don't send ya home when they figure it's close to a curtain call.... the lawyers and paperwork decides that in the USA....... unless there are big changes..... and so far... in Washington DC.... and Trump ain't getting it done.

he's actually (kind of) keeping his promises!

don't close your eyes for one minute.



 

Edited June 30, 2017 by maewang99

[KarenBravo]

6 minutes ago, ELVIS123456 said:

I am certainly in favor of a lower Baht - and if this means things will head in that direction, then that is a good thing. If TAT can get onto this and agree a lower Baht will increase tourism, and Exporters also get on board, maybe it will happen. Mercs will cost more, but hey, maybe 'they' will understand that more incoming money/tourists means more money in the long run - hope so.  Compared to when I first came to Thailand, my home currency has gone down by 20%.  If it goes back up again I might buy a place - maybe others will too?  Maybe more money will come into Thailand?  Come on Thais (Govt) - do the math. 

Oh dear......you are under the misconception that the Thai government can control the Baht exchange rate.

Britain being ejected from the ERM in 1992 pretty much proved conclusively that the markets had far more capital at their disposal than any one, medium sized country. The UK government emptied the state coffers trying to defend Sterling and it still didn't work.

 

I think the Baht will stay within a 32 - 37 range to the US$ with any sudden anomalies in any particular currency due to events within the other country i.e. Brexit.

[how241]

I would like to see the USD/Baht rate at around 35-37.  Maybe I am dreaming.

[Eric Loh]

3 hours ago, Searat7 said:

The coffers are almost empty in Thailand as I recall BUT foreign currency reserves are supposedly healthy. Every time they announce a new program I wonder where the money will come from.  The Junta will not be leaving the new government in a good situation if and when elections are finally held.

Thank god that the foreign currency reserves is managed by an independent BOT and the junta government can't get their greedy paws on it. 

[Lobber]

they aint got a clue 

[Ricardo]

1 hour ago, Eric Loh said:

Thank god that the foreign currency reserves is managed by an independent BOT and the junta government can't get their greedy paws on it. 

 

I quite agree, ditto for the previous administrations who were also often spending money which they hadn't got, for example the rice-scheme refinanced-borrowing is still only being-rolled-over, and hasn't actually been paid-off !

 

Similarly I wonder whether the early-repayment of the IMF-loans was done out-of-revenue, or will also be coming back to bite Thailand eventually, I vaguely recall talk of 25-year zero-coupon bonds, does anyone else know anything more accurate ?

[khunken]

1 hour ago, Eric Loh said:

Thank god that the foreign currency reserves is managed by an independent BOT and the junta government can't get their greedy paws on it. 

Do you mean like Kittirat sweeping B1.14tn under the BOT carpet to allow YL & co to try to grab even more debt for 'projects' that weren't even evaluated let alone given the go-ahead?

[Eric Loh]

47 minutes ago, Ricardo said:

 

I quite agree, ditto for the previous administrations who were also often spending money which they hadn't got, for example the rice-scheme refinanced-borrowing is still only being-rolled-over, and hasn't actually been paid-off !

 

Similarly I wonder whether the early-repayment of the IMF-loans was done out-of-revenue, or will also be coming back to bite Thailand eventually, I vaguely recall talk of 25-year zero-coupon bonds, does anyone else know anything more accurate ?

You can find all of the information on public domain. The IMF loan was paid up 2 years in advance from better export revenues, surging FDI and a more favourable exchange. The average 6% GDP growth during Thaksin tenure and the surplus current account were boon to revenue, built-up of much needed foreign reserve currency and a better exchange rate. No bond was issued for the repayment. 

[Eric Loh]

49 minutes ago, khunken said:

Do you mean like Kittirat sweeping B1.14tn under the BOT carpet to allow YL & co to try to grab even more debt for 'projects' that weren't even evaluated let alone given the go-ahead?

 

If you meant the 1.14 T B infrastructure project, it is now 2.9 T B and in the hands of those greasy military palms. Do try to catch up. 

[khunken]

5 minutes ago, Eric Loh said:

 

If you meant the 1.14 T B infrastructure project, it is now 2.9 T B and in the hands of those greasy military palms. Do try to catch up. 

Nothing to do with the BOT or the Baht. Do try to stay on topic & no, I was referring to the 'gimmie the money first' B2.2tn for PTP to play around with.

Edited June 30, 2017 by khunken

[Eric Loh]

11 minutes ago, khunken said:

Nothing to do with the BOT or the Baht. Do try to stay on topic & no, I was referring to the 'gimmie the money first' B2.2tn for PTP to play around with.

The BOT is a juristic person which is a state agency, and is neither a government agency nor state enterprise under the law on budgetary procedure and other laws. So please tell me how the BOT able to "give money" to the government. 

[Jeremy50]

It's a serious issue for Brits relying on UK savings or a pension. BREXIT and the resulting chaos will drag on for years, as will the weak pound , older ex-pat's may not see a stronger pound within their lifetime. It's that depressing.  A devaluation of the Baht by 20% - 30% would be a lifeline for many.