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Why is the baht’s strength a worry?
As is always the case when currencies strengthen, exporters are suffering. The country’s tourism industry, which accounts for about a fifth of GDP, is also hurting. The Tourism Council of Thailand last month revised down its estimate for visitor numbers this year to fewer than 40 million, citing the baht as the biggest reason.
All of which is conspiring to sap growth. The economy will expand 3% this year, down from 4.1% in 2018, according to a Bloomberg survey of analysts.
How much more can the baht appreciate?
Right now, all eyes are on whether the baht will breach 30 per dollar, a level it hasn’t reached in more than six years. Of the 24 analysts surveyed by Bloomberg on the currency, Morgan Stanley is the only one expecting it to reach that point by the end of this year. The median estimate is for it to fall to 30.8 by then and to 31 in 2020.
According to the IMF’s real effective exchange rate calculations, which take into account Thailand’s trade flows, the currency’s already well overvalued. It’s at the strongest, by that measure, since its crash in 1997, which triggered the Asian financial crisis.
