BANGKOK :The strengthening of Thailand’s currency to a four-year high is a threat to exports and tourism, two key growth engines for the struggling economy and posing a major economic headache for the incoming government of Prime Minister Anutin Charnvirakul.
The baht is up 8 per cent against the U.S. dollar this year, the second-largest gain amongst Asian currencies, behind only the Taiwan dollar.
“A strong baht reduces export and tourist revenue via both pricing and volume effects,” said Kobsidthi Silpachai, head of Capital Markets Research at Kasikornbank.
“The baht’s strength comes at a bad time ahead of the peak tourist season, which is likely to prompt holiday makers to shop elsewhere for better value.”
Southeast Asia’s second-largest economy is struggling with U.S. tariffs as well as sluggish consumption, with households mired in debt.
The state planning agency forecast economic growth of 1.8 per cent to 2.3 per cent this year, less than last year’s 2.5 per cent expansion, which already lagged regional peers.
A rare bright spot has been exports, which have seen a value increase of 14.4 per cent annually in the first seven months. A slowdown is now expected, following a 19 per cent tariff imposed by the United States, Thailand’s largest export market.
Faced with a stronger baht, Thai manufacturers are also struggling to compete with regional rivals like Vietnam, even though it has a marginally higher tariff rate of 20 per cent.
“Instead of benefiting from the tariff gap, the strong baht ends up putting us at a disadvantage in exports. That’s why many industries are complaining,” said Nava Chantanasurakon, Vice Chairman of the Federation of Thai Industries.
“If we don’t address the baht issue, confidence in exports will drop.”
Industries that are particularly feeling the pain include the electronic parts industry and the automotive sector, he said.
Thailand is a regional auto production and export hub for top Japanese carmakers such as Toyota and Honda, as well as dominant Chinese EV brands.
The other risk is to the vital tourism sector, already grappling with a 7 per cent year-on-year fall in foreign arrivals.
Theinprasit Chaiyapatranun, president of the Thai Hotels Association, said that a stronger baht hadn’t significantly impacted hotel bookings or the broader tourism sector so far, but that could change.
“If the baht remains strong for an extended period – such as continuing into next year – there will likely be an impact,” he said.
The baht’s rally comes during a change of guard in government and also at the Bank of Thailand. Outgoing central bank governor Sethaput Suthiwartnarueput said on Tuesday that discussions are now underway to find and deploy measures to counter the currency’s strength.
Prime Minister Anutin, whose cabinet is yet to take charge, has also said he will tackle the baht’s appreciation.
“The prime minister is listening,” said Nava of the Federation of Thai Industries.
“We don’t want to see the government interfere with the central bank, but find a way for better coordination.”
