Fast-appreciating baht raises concerns for Thailand’s economy
Government wants BOT to intervene amid worries about impact on exports and tourism
The baht is appreciating at its fastest rate in 26 years, since the Asian financial crisis in 1998, which has directly impacted Thailand's slowly recovering tourism and export sectors, Bloomberg News reported.
Although the baht's strength is partly due to the weakening of the US dollar ahead of the Federal Reserve's interest rate cut, the unexpected appreciation compared to key trading currencies has reduced the competitiveness of Thai goods.
Commerce Minister Pichai Naripthaphan and Deputy Finance Minister Paophum Rojanasakul on Friday urged the Bank of Thailand (BOT) to intervene with measures to slow down the baht's appreciation and reduce exchange rate volatility.
Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), said that the rapid appreciation of the Thai currency had further raised production costs for the private sector, and the influx of cheap imports from China was exacerbating the situation.
“What we need is a stable baht and assistance in managing rising financial costs,” Kriengkrai stated.
Paophum added that “Action should be taken to ensure that the baht is “neither too strong nor too weak, and most importantly, not overly volatile.”
Despite the tourism sector's continued growth, the baht's appreciation could reduce tourists' purchasing power, particularly affecting their spending on shopping and accommodation.
Surawat Akaraworamat, vice president of the Tourism Council of Thailand (TCT), said that it may influence foreign tourists' spending, as the appreciation would make goods and services in Thailand appear more expensive.
Furthermore, the stronger baht could hinder achievement of Thailand's tourism targets for this year.
The baht's strength poses a new challenge for Prime Minister Paetongtarn Shinawatra, who aims to stimulate the economy and reduce living costs amid Thailand's slower economic growth compared to other ASEAN nations. Tourism and exports are considered key pillars driving the economy.
The BOT has expressed concern over the sharp currency fluctuations in the past three months, with the baht appreciating 9.14% against the US dollar, the highest in several months, exceeding the annual average of 7.96%. This has significantly affected the export sector.
The BOT vowed to step in to stabilise the baht to prevent further adverse impacts on the overall economy.
Nattaporn Triratanasirikul, the deputy managing director of Kasikorn Research Center, said that the continuous appreciation of the baht would be a key factor for the BOT to consider when the Monetary Policy Committee meets on October 16 to decide on the interest rate direction.
