THAI BAHT CONTINUES AN EPIC SLIDE

The Thai currency is down more than 9 per cent against the dollar since the end of 2020, placing it among this year’s weakest performers globally.  The loss of tourism dollars on which Thailand’s economy relies, combined with a wave of Covid-19 infections that has quashed hopes of a quick economic recovery, have turned formerly bullish buyers of its assets into bears.

“The baht is uniquely exposed to the collapse in cross-border services, and obviously tourism is the big one,” said Mark Baker, investment director with Aberdeen Standard Investments.  “That number has basically collapsed to zero, and there has been a massive balance of payments shock.”

In 2019, the last pre-pandemic year, Thailand hosted a record 40m foreign visitors.  Tourism was a reliable source of foreign exchange that kept the current account in significant surplus, and foreign investors’ interest in the baht, high.  Since the start of the pandemic, the reversal of fortunes has been stark.

In the 12 months to the end of June, Thailand’s current account deficit was $2.2bn, a “massive turnround” from the $40bn surplus the country reported before the pandemic, said Khoon Goh, head of Asia research for ANZ in Singapore.  “One of the major drivers of baht strength pre-pandemic was its large current account surplus, driven largely by the tourism sector,” Goh said.  “That is gone now: it has completely disappeared and won’t come back for a long time, given what’s happening.”

Additionally, Krungsri Securities analyst Isara Ordeedolchest said in a research note, ‘the THB is unlikely to recover meaningfully as Thailand’s economic growth trajectory is expected to trail behind regional economies until at least 2022,’

“People were expecting by the end of the year we could have a recovery of tourism, but it’s quite clear now that this isn’t going to happen,” said Pipat Luengnaruemitchai, chief economist at Phatra Securities in Bangkok.  “We don’t believe we can open to tourism more meaningfully until the second half of next year.”

This morning (August 5th) it has dropped again to;

GBP – 46.12

USD – 33.11

EUR – 39.32

AUS – 24.53