Thai baht surge hits exporters and tourism revenues
Thailand’s exporters and tourism sector are feeling the squeeze as a rapid appreciation of the Thai baht continues to impact revenue. The central bank attributed this surge to a weak US dollar and stronger regional currencies, such as the Chinese Yuan and Japanese Yen.
Yesterday, September 30, the baht reached a 31-month peak at 32.235 against the US dollar, marking a 5.8% increase year-to-date. This makes it the second-best-performing currency in the region, trailing only Malaysia’s ringgit.
Exports and tourism are fundamental components of Thailand’s economy, Southeast Asia’s second-largest. The baht’s swift rise is set to be a central topic at an upcoming meeting between the central bank and the Finance Ministry this week. This meeting will also cover the country’s inflation target.
The discussion follows months of governmental pressure on the Bank of Thailand (BoT) to cut interest rates in synergy with fiscal policies aimed at economic stimulation. Despite the pressure, the central bank has maintained the interest rate at 2.50% for five consecutive meetings, arguing that a rate cut is currently unnecessary. The next rate review is scheduled for October 16.
BoT Assistant Governor Chayawadee Chai-anant addressed reporters, stating that the central bank has managed the baht’s volatility.
“The stronger baht is impacting exporters when converting profits back to baht.”
Chayawadee added that tourism spending is also adversely affected.
In August, exports rose by 11.4% year-on-year, while imports increased by 8.5%, resulting in a trade account surplus of US$2.4 billion, according to BoT data.
The current account surplus for August was US$1.4 billion, a significant rise from the revised US$0.1 billion surplus in July. The surge was attributed to accelerated exports of agricultural products to trading partners facing shortages.
Thailand’s economy grew at a faster pace of 2.3% in the April-June quarter compared to the previous year. However, analysts noted that fiscal policy uncertainty continues to cast a shadow over the outlook.
The BoT has projected economic growth of 2.6% for 2024, following a 1.9% expansion last year, which lagged behind regional peers, reported Bangkok Post.
The upcoming meeting between the central bank and the Finance Ministry could provide more clarity on the government’s approach to managing the baht’s appreciation and its broader economic implications.
