Firms jittery as baht keeps rising
The Thai business sector has voiced concern that the rapid gain of the baht will take a toll on exports, causing the economic recovery to falter, says the Thai Chamber of Commerce (TCC).
Chairman Kalin Sarasin said the business sector wants the Bank of Thailand to monitor baht movement closely to ensure it is ready to curb appreciation if needed.
“The baht is rising very fast and we want to ask the central bank to have some measures ready to help stabilise the currency, particularly to support small and mediumsized enterprises [SMEs],” said Mr Kalin.
He also urged SMEs to use currency hedging to help reduce risks incurred by baht fluctuation.
The baht edged up to 33.94 to the dollar yesterday, marking its highest point in nearly two years, on investor relief after the central bank did not introduce stricter measures to curb its strength. The local currency is one of the best-performing currencies in the region this year, rising about 5% against the greenback.
The Bank of Thailand in April imposed a measure to scale back short-dated bond sales in an effort to lower short-term fund inflows, which are strengthening the baht. The measure is still in place.
In another development, the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) reported the Thai economy grew 3.3% in the first quarter this year, said Mr Kalin.
He attributed the rise to increasing exports. The JSCCIB maintained its Thai GDP growth forecast at 3.5-4.0% and export growth outlook at 2.0-3.5% this year.
The JSCCIB is comprised of the TCC, the Federation of Thai Industries and the Thai Bankers’ Association.
Mr Kalin said the JSCCIB expects the Thai economy will continue to grow in the second half of the year largely because of the government’s massive investment in infrastructure projects, particularly in the Eastern Economic Corridor (EEC).
The EEC project spans more than 30,000 rai in the three eastern provinces of Rayong, Chon Buri and Chachoengsao. It was designed to accommodate new investment in targeted industries with added value to help push the economy towards the Thailand 4.0 era.
Ghanyapad Tantipipatpong, chairwoman of the Thai National Shippers’ Council, said many exporters are concerned the strong baht will affect their competitiveness.
“We’re concerned the capital inflows are for short-term gains, as we don’t know the exact purpose of the incoming capital. If the capital is to invest in the real sector for the long term, there will be no harm,” she said.
In related news, Bank of Ayudhya yesterday raised its baht forecast average by one baht to 34.50 at the end of the year from 35.50 previously because of greater uncertainties, particularly in US policy, said Tak Bunnag, head of global markets group.
US President Donald Trump’s policy uncertainty has increased the market’s disappointment and weakened the dollar, he said. The baht has gained 5.3% against the dollar this year, following South Korea’s won appreciating 7.9% and Taiwan’s dollar increasing 7.2%.
Markets now forecast the US Federal Reserve will raise its policy rate twice more this year and the gap between the Federal fund rate and the Bank of Thailand’s policy rate will be narrowed, said Mr Tak.