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Baht to climb higher against USD, more pressure on exports

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Baht to climb higher against USD, more pressure on exports | The Thaiger

The Thai baht is set to soar further as one side effect of the latest escalation of the China-US trade war. Economists say the latest tit-for-tat trade sanctions will hasten foreign capital inflows into Thailand’s “safe haven” bond market while the US Federal Reserves may again cut interest rates, adding more fuel to the situation.

Meanwhile the Thai export situation is expected to continue to worsen.

China announcing on August 23 a set of retaliatory tariffs of between 5-10% on $75 billion worth of US goods. US President Donald Trump responded by raising existing tariffs on $300 billion worth of Chinese goods by 15%, effective December 15. Read The Thaiger story HERE.

Markets reacted badly last Friday afternoon and then again on Monday morning when markets opened across Asia.

Thailand’s economy, in particular, stands in the cross-fire of the trade tensions as the country produces electronic parts and agricultural products that are sent to China before being shipped into the US. Hence, the tariffs imposed between the two countries directly impact Thailand’s own exports, causing the country’s volume of shipments to decline in the first half of 2019.

The worsening sentiment in the global economy will continue to have an adverse impact on Thailand, which is an export-reliant economy, said Mana Nimitvanich, first vice president of Krungthai Bank’s Global Business Development and Strategy Group.

Furthermore, the baht is likely to get stronger in the upcoming months if the trade war continues as the US Federal Reserves will be more inclined to again lower interest rates , Chatree said. This will cause the US dollar to depreciate further against the Thai currency, he added.

“Thailand is seen as a safe haven for global investors and if the trade war is prolonged, investors will continue to invest in Thailand’s bond market, accelerating the baht’s rise against the US dollar.”

The Bank of Thailand has already tried to limit hot money inflow into the Kingdom and even lowered the country’s policy interest rate in an attempt to keep the baht strength under control. However, the impact of these measures are yet to take affect.

Standard Chartered Bank predicts that the baht will remain strong at 30.5 baht per US dollar for the rest of 2019.

“We are not sure if the baht strength can be kept under control by the central bank in the upcoming months as safe haven inflows continue into Thailand’s bond market ,” said Tim Leelahaphan, a StanChart’s economist.

“The baht’s strength will lead to negative impacts on Thailand’s exports and tourism figures. As long as the trade war continues, this negative impact will stay,” Chatree said.

SOURCE: The Nation

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No impact on PTT’s imports from Saudi oil refinery attack: Thai minister

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No impact on PTT’s imports from Saudi oil refinery attack: Thai minister | The Thaiger

Thai energy minister Sontirat Sontijirawong claims that last Saturday’s attacks on two major oil-processing facilities run by the Saudi-owned company Aramco will not affect oil imports of the Thai petro-chemical giant PTT group.

He added that he had learnt from Aramco and related parties that the situation there was under control and the damage was being assessed. The incident would not affect the oil depots, which supply crude oil to Thailand’s oil and gas conglomerate PTT, according to the minister.

He says the ministry is keeping itself abreast of the situation and has already devised a “back-up plan”. He assured that the country had sufficient supply for the short-term if the attack led to severe impact on Saudi Arabia’s oil exports. He added that the country’s oil reserves were enough for 30 to 45 days if there was a supply shortage.

The Nation reports that the drone attack reportedly cut Saudi Arabia’s output by around 5.7 million barrels per day – approximately 5% of the total global oil production.

Anusorn Thammajai, director of Rangsit University’s Institute of Economics, warned that if Saudi Arabia counterattacked, the situation could worsen and that would put pressure on global and Thailand’s oil price.

The global oil price could jump by between US$5 – $10 per barrel next week. If the baht remains strong, this could assuage the impact from the pressure on local retail oil price to a certain degree.

SOURCE: The Nation

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Industry group calls for further cut in Thai policy interest rate

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Industry group calls for further cut in Thai policy interest rate | The Thaiger

“Thai private sector, recently adjusted downward the export growth projection for this year to 2.9 – 3%.”

The Federation of Thai Industries have their hopes set on the Monetary Policy Committee of the Bank of Thailand making another cut in the policy interest rate, currently set at 1.5%. With the US Fed looking to drop its interest rate this week, the FTI want the local cut to prevent the baht currency from strengthening further.

FTI vice president Kriangkrai Thiennukul says that the FTI is seriously concerned that the strengthening of the Thai currency, to one of the strongest in the region, will worsen the Thai economic slowdown in both the short and long term.

He says that the baht fluctuated between 30.40-30.50 baht/US$ last week and reached the highest level against the US$ in six years. The Thai currency has strengthened by 6% against the US greenback since the beginning of this year, making it stronger than other currencies in the region.

The strong Thai baht has made it a safe haven for foreign investors that can speculatively park their cash in the baht currency and in government bonds.

Mr. Kriangkrai said the FTI expects the Bank of Thailand to monitor the Thai baht closely, to prevent its strength affecting Thai exports, which are already being hurt by the US-China trade war, and the tourism sector.

The FTI, the Thai Bankers Association and the Thai Chamber of Commerce, the three main pillars of the Thai private sector, recently adjusted downward the export growth projection for this year to between  -1% and 1% and economic growth to 2.9-3%.

Additionally, Mr. Kriangkrai warned that there is a tendency for the projected export and economic growth rates to be further lowered.

He suggested that the government should speed up the concluding of FTA (Free Trade Area) agreements with Thailand’s trading partners, especially the European Union, to open up markets for Thai exports.

SOURCE: Thai PBS World

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“Phuket needs a world class exhibition and convention centre”

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“Phuket needs a world class exhibition and convention centre” | The Thaiger

“Two key developments we are tracking is Central Festivals next phase of expansion and Proud Groups Andamanda project that both have significant concerence, meeting and incentive space.”

Plans to promote Phuket as a world-class MICE (meetings, incentives, conventions, exhibitions) location are being obstructed by many impediments –  inefficient town planning, poor transport systems and poor availability of land in tourist locations.

Dusida Worrachaddejchai writes that Phuket’s deputy governor says the province has a blueprint to build an exhibition and convention hall to host international events with a capacity up to 5,000. But he said that town planning rules forbid building a hall larger than 6,000 square metres with a hight greater than 23 metres.

The prohibition for a proper convention hall by town planning appears to be one of the few projects impeded by lax town planning laws.

The project has been talked about for decades with Phuket’s potential as an active MICE venue being hampered by the lack of facilities, principally a large convention and exhibition centre.

If some provisions of the current town planning act for Phuket can be amended, the likely destination for a convention centre would be Thalang district. The deputy governor says he hopes it can be built in a few years and make Phuket able to bid for international events and expos.

But Thalang, although within 15 minutes of the Phuket International Airport, has little offer convention and exhibition delegates with most of the beaches and tourist infrastructure on the island’s southern coastal areas (Patong, Kata, Karon).

C9hotelworks’ Bill Barnett says proper MICE facilities have been a long time coming for Phuket.

“Phuket hotel developers are finally seeing the signifigance of the MICE trade. Two key developments we are tracking is Central Festivals next phase of expansion and Proud Groups Andamanda project that both have significant concerence, meeting and incentive space. TCEB ae active in the working on Phuket as a MICE destination so we see the future direction as positive, at last.”

Meanwhile the Thai government has foreshadowed that five Thai cities will be earmarked as MICE locations – Phuket, along with Chiang Mai, Khon Kaen, Pattaya and Bangkok. The deptuty governor sprouted Phuket’s existing MICE credentials – 600 hotels offering 40,000 guest rooms, 220 convention rooms, 615 meeting rooms, 14 piers and four private marinas. But these facilities are spread all over the island with poor access and almost no public transportation.

Plans for a world class convention centre have been brought up from time to time over the past two decades with provincial officials huffing and puffing about the need for a proper facility for the growing island but, so far, nothing has happened and the island remains a leading tourist destination with little attraction for larger conferences, exhibitions and events.

In the past the private sector – primarily Central Group and Jungceylon – have indicated their interest to build a convention hall in the Patong area. But town planning issues and the ever-dwindling available land in the seaside city have shelved any progress.

Southern beach locations, with excellent hotels, shopping and beaches – Karon and Kata – have also been flagged as potential locations but access, especially from the airport, remains poor. Travel times to the southern beaches from the airport is at least an hour and involves trips across the notorious hills roads at either Patong or Kata.

Progress on the Patong Tunnel has also stalled with successive governments unable to progress the project.

The government should improve mass transport from the airport to Patong and other western coast districts in Phuket, namely Karon, to facilitate large groups such as Mice travellers that require more than buses and vans, Ms Chalermluck said.

Last year, more than 2 million visitors arrived in Phuket for MICE events, generating 19.5 billion baht in income. But MICE industry proponents say that number could be easily tripled with a proper convention and exhibition venue.

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