Economists and exporters agree strong Baht harms Thai economy

A strong Thai baht against the US dollar does more harm than good to the Thai economy, according to the opinions of three economists and rice exporters.

Dr. Naris Sathapholdeja, chief of the Data and Analytics Group of TMB Thanachart Bank, said that the strengthening of the Thai baht against other currencies in this region makes both exports from Thailand and tourist visits to Thailand more expensive.

The advantage is that importing oil costs Thailand less. Annual oil imports to Thailand are estimated at 1.5 trillion baht, but compared to 1.7 trillion baht revenue generated from tourism and total exports worth about 1.9 trillion baht annually, Naris noted that Thailand loses more than it gains from a stronger currency.

He predicted that the Thai baht will continue to strengthen to below 32 baht per US dollar. Before reaching that level, he said exporters and tourism operators may step up their demands for the government to step in to regulate the currency, to prevent it from strengthening further.

Dr. Amornthep Chawla, executive vice president and chief of research at CIMB Thai Bank, said that the continuing appreciation of Thai baht, which is currently the strongest in the region, is exacerbated by the weakening of the US dollar and the inflow of capital into the emerging markets, such as Thailand and Malaysia.

He pointed out that a signal from the Bank of Thailand, that it will not cut the base rate, is attracting capital flow into the Thai bond market. This is bolstered by increasing foreign investor confidence in Thailand due, in part, to the government’s economic stimulus measures.

Thailand’s position as a major gold trading hub is also a contributing factor in the strengthening baht, as the price of gold on the world market rises, said Amornthep.

The world, he said, is watching to see whether the US Federal Reserves will cut their base rate by as much as a further 50 basis points or not, adding that, if the economic situation in the US is improving, the interest rate cut may be just 25 basis points and this will reduce the pressure on the Thai baht.

Kanchana Chokpaisarnsilp, a research executive at Kasikorn Research Centre, said that it is likely that the Thai baht will fluctuate between 32.50-32.10 baht against the Greenback in the short term.

Chukiat Opaswongse, honorary president of the Thai Rice Exporters Association, said that Thailand exported 7 million tonnes of rice in the first three quarters of this year, averaging about 800,000 tonnes per month.

By the end of this year, however, only 8.5 million tonnes of rice will have been exported in total, thanks to the strong Thai baht, which will hit rice exports in Q4 harder than rival exporters such as India and Vietnam.