Baht Battered

**tomcat** · 20-08-2021, 12:59 PM

Thailand’s First Twin Deficit in Nearly a Decade to Hit Baht

Thailand’s First Twin Deficit in Nearly a Decade to Hit Baht

By Suttinee Yuvejwattana (Bloomberg)
Fri, August 20, 2021, 10:59 AM

(Bloomberg) -- Thailand is heading for a rare current account deficit this year with the country missing out on the billions of dollars earned from tourism, likely piling more pressure on the nation’s already battered currency.

Southeast Asia’s second-largest economy may post a current account shortfall of $10.3 billion, or 2% of gross domestic product, the first deficit since 2013, the National Economic and Development Council estimates. Add to it a budget deficit seen topping 10% of GDP for the 12 months through September, it’s a double blow for the baht, which was on a U.S. manipulator watch list earlier this year.

The reversal of fortunes for Asia’s worst-performing major currency this year echoes the damage wrecked by the pandemic on Thailand’s economy. With the nation reeling under the deadliest phase of the Covid outbreak so far, authorities have imposed growth-sapping restrictions on businesses and movement. That’s dented any chances of a quick recovery and plans for a wider reopening of borders to foreign visitors, who contributed more than $60 billion to the economy before the pandemic.

“Thailand’s weak growth outlook, especially because of its reliance upon tourism, has soured sentiment toward the baht,” said Dhiraj Nim, a foreign exchange strategist at Australia & New Zealand Banking Group Ltd. “Its usual current account surplus has also turned into a deficit in recent months, eroding support for the currency.”

The baht has tumbled 10.2% this year to trade near a three-year low and is on course for its biggest annual drop since 2000, according to data compiled by Bloomberg. More losses and volatility may be in store for baht because of the domestic factors, according to Bank of Thailand’s Monetary Policy Committee.

The worsening outlook for growth and the raging outbreak have spurred foreign investors to pull out a net $3.34 billion from Thailand’s stocks, weighing further on the currency. Bank of Thailand sees downside risks to its GDP forecast of 0.7% for this year and Governor Sethaput Suthiwartnarueput this week called for 1 trillion baht in additional government spending to cushion the pandemic blow to the economy.

The government doesn’t see the need for additional borrowing to combat the outbreak as a previously approved 500 billion baht debt plan is adequate, the Bangkok Post newspaper reported Friday, citing Finance Minister Arkhom Termpittayapaisith.

Bumpy Recovery

While Standard Chartered Bank Plc expects Thai economy to shrink for a second straight year because of the bumpy recovery seen from the pandemic, Nomura Holdings Inc. sees the country’s current account deficit lasting at least until the second quarter of 2022. Both the banks expect the Bank of Thailand to cut interest rate at its next meeting in September.

Nomura expects the baht to weaken to 34 to the dollar in the near term, supported by a more pro-growth central bank that’s likely to lower its key rate and a wider current account deficit on weak tourism outlook, economists led by Charnon Boonnuch and Euben Paracuelles said in a note this week.

While a weaker baht is beneficial to Thai exports, the central bank should be more active in curbing excessive volatility as the currency has fallen more than its regional peers, according to Kobsidthi Silpachai, head of capital market research at Kasikornbank Pcl in Bangkok.
“The BOT might be forgetting its mandate of managed float,” Kobsidthi said. “Excessively moves in the currency is counterproductive economically as businesses cannot plan and price their products and service properly.”

The fiscal deficit will balloon to 10.1% in the year ending September, from 6.4% the previous fiscal, as tax revenue trails target and the government borrows more to fund virus stimulus, according to Nomura. The public debt-to-GDP ratio may be raised to 70% next month to meet the need for greater borrowing, it said.

The baht may also have to contend with risks from global financial market volatility, especially as the U.S. Federal Reserve draws closer to eventual tapering, ANZ’s Nim said. But “ebbing of the pandemic cases can help reverse the sentiment toward the baht,” he said.

**Shutree** · 20-08-2021, 01:36 PM

Originally Posted by tomcat

The government doesn’t see the need for additional borrowing to combat the outbreak as a previously approved 500 billion baht debt plan is adequate, the Bangkok Post newspaper reported Friday, citing Finance Minister Arkhom Termpittayapaisith.

Originally Posted by tomcat

The fiscal deficit will balloon to 10.1% in the year ending September, from 6.4% the previous fiscal, as tax revenue trails target and the government borrows more to fund virus stimulus, according to Nomura. The public debt-to-GDP ratio may be raised to 70% next month to meet the need for greater borrowing, it said.

We shall see. I am inclined to trust Nomura's predictions before Arkhom's.

**Klondyke** · 20-08-2021, 01:45 PM

Originally Posted by tomcat

Baht Battered

Thai exporters enjoying getting 10% more for their $ prices...

**Shutree** · 20-08-2021, 02:08 PM

Originally Posted by Klondyke

Thai exporters enjoying getting 10% more for their $ prices...

They probably are, and so long as they don't have to import any raw materials then they will be happy. BUT, that doesn't actually generate any additional USD inflow and since Thai debts are in foreign currency what the government needs is more USD. That might be achieved by Thai exporters reducing their USD prices in order to grab a bigger market share. That all depends on the elasticity of demand for various products in various markets, it might or might not be successful.

Meanwhile, people are looking at where the Baht is heading and will be delaying any inward investments until they think the Baht has stopped sliding. I am sure that I am not alone here in delaying fund transfers for the time being. My personal contribution is not significant (sigh) but if you multiply me by many others then it begins to make a difference.

**tomcat** · 20-08-2021, 03:05 PM

Originally Posted by Shutree

That might be achieved by Thai exporters reducing their USD prices in order to grab a bigger market share.

...such an action might lead to an accusation of dumping and incur significant penalties from importing countries...

**havnfun** · 20-08-2021, 03:07 PM

Originally Posted by Shutree

I am sure that I am not alone here in delaying fund transfers for the time being

Same same.got a visa extension coming up in January, luckily only need a little top up this year.

**Klondyke** · 20-08-2021, 04:48 PM

Originally Posted by Shutree

They probably are, and so long as they don't have to import any raw materials then they will be happy. BUT, that doesn't actually generate any additional USD inflow and since Thai debts are in foreign currency what the government needs is more USD.

Thai debt is not the problem of the thousands of poor SME's - and millions of their workers - around the country. They mostly do not need any foreign raw material.

Do not include the car industry, those are in another category, who will cry over them?

**Backspin** · 20-08-2021, 11:18 PM

Still just a miniscule 10% deficit. This won't stop all the ignorant Thailand goers from predicting a 1997 level wipe out so they can live high on the hog again. Its never gonna happen. If anything the opposite will happen and there will be a wop out in the imperial currencies.

**snakeeyes** · 21-08-2021, 12:08 AM

The Baht is still strong the £1 and the Aussie Dollar took a hit .

**Klondyke** · 21-08-2021, 09:56 AM

Originally Posted by Backspin

Still just a miniscule 10% deficit

All the SME business owners are happy for the "miniscule" deficit, prying that it will "miniscule" further, thus being able not to delay the workers wages, suppliers payments and repay the debts to banks, visiting the local wats with donations, asking Buddha to help keeping the $ still going strong - not as many are predicting - promising him to bring more donations if he helps...

**panama hat** · 21-08-2021, 11:44 AM

Originally Posted by Klondyke

Do not include the car industry, those are in another category, who will cry over them?

Employing 850.000 people directly and indirectly
12% of of GDP
2400 related businesses

Yea, you're right . . . no-one will cry 'over' them.

Originally Posted by Klondyke

Thai debt is not the problem of the thousands of poor SME's - and millions of their workers - around the country. They mostly do not need any foreign raw material.

Let's get some examples and see if they actually do require purely non-Thai products - thank you, this should be interesting.

Luckily you're in good company:

Originally Posted by Backspin

there will be a wop out in the imperial currencies.

**Klondyke** · 21-08-2021, 12:35 PM

^How can I comment on Thai business conditions when we have here our expert born in Klong Toy? (A disciple of the one who needs a good English speaking lawyer for his sojourn in Chiang Mai...)

**panama hat** · 21-08-2021, 03:20 PM

Originally Posted by Klondyke

^How can I comment on Thai business conditions

Good question - why do you when you talk shit about a subject you have no knowledge about?

Originally Posted by Klondyke

Do not include the car industry, those are in another category, who will cry over them?

Originally Posted by panama hat

Employing 850.000 people directly and indirectly
12% of of GDP
2400 related businesses

Yea, you're right . . . no-one will cry 'over' them.

Originally Posted by Klondyke

Thai debt is not the problem of the thousands of poor SME's - and millions of their workers - around the country. They mostly do not need any foreign raw material.

So, no examples then? Just more vacuous bullshit a la Skidmark?

**Klondyke** · 21-08-2021, 07:37 PM

Originally Posted by panama hat

So, no examples then? Just more vacuous bullshit a la Skidmark?

What examples? Ordered by Klong Toy boy?

There are over 3 million SME's in Thailand. Only a portion of these millions is involved in car making industries - their factories mainly located on the lots prepared by Industrial Estate Authority of Thailand, south and north from Bkk, where also other foreign factories are.

Almost all of these factories are owned by their mother companies abroad (sometimes the ownership is not so easy to follow up), they provide them also with raw material from abroad if needed.

The foreign companies are covering just the production cost of the Thai factories but the entire added value gained by the foreign marketing and their sales will not touch the Thai economy. So, the fluctuation of the Thai Baht will not much bother these SME's.

Unlike all other modest SME's that have no connection to foreign participation (almost), providing the marketing by themselves or by some trading companies (almost all) in Bkk, many of them attending every year trade shows in USA, Europe and Hong Kong. Trying to survive in the strong competition of the other Asian companies. Residing all over the Thailand. Many collapsing and many others starting.

For them the stronger or weaker Baht is utmost important. They are the backbone of the Thai economy in provinces, providing jobs for the majority of the population of the 70+ million...

**panama hat** · 22-08-2021, 03:24 AM

So, nothing . . . well done, Klongdick

**Backspin** · 22-08-2021, 04:18 AM

Originally Posted by Klondyke

What examples? Ordered by Klong Toy boy?

There are over 3 million SME's in Thailand. Only a portion of these millions is involved in car making industries - their factories mainly located on the lots prepared by Industrial Estate Authority of Thailand, south and north from Bkk, where also other foreign factories are.

Almost all of these factories are owned by their mother companies abroad (sometimes the ownership is not so easy to follow up), they provide them also with raw material from abroad if needed.

The foreign companies are covering just the production cost of the Thai factories but the entire added value gained by the foreign marketing and their sales will not touch the Thai economy. So, the fluctuation of the Thai Baht will not much bother these SME's.

Unlike all other modest SME's that have no connection to foreign participation (almost), providing the marketing by themselves or by some trading companies (almost all) in Bkk, many of them attending every year trade shows in USA, Europe and Hong Kong. Trying to survive in the strong competition of the other Asian companies. Residing all over the Thailand. Many collapsing and many others starting.

For them the stronger or weaker Baht is utmost important. They are the backbone of the Thai economy in provinces, providing jobs for the majority of the population of the 70+ million...

A lower Baht is good for exports in the same way that lowering your own wages will get you more work. Thailand should not celebrate or shoot for a weak baht. You want what you earn to be worth more. Let the currency appreciate if there's upward pressure on it. The economy will adjust. Which means marginally less exports but who cares. Let the economy climb the value chain. Which Thailand has been doing mostly.

**Klondyke** · 22-08-2021, 09:51 AM

Originally Posted by Backspin

A lower Baht is good for exports in the same way that lowering your own wages will get you more work. Thailand should not celebrate or shoot for a weak baht. You want what you earn to be worth more. Let the currency appreciate if there's upward pressure on it. The economy will adjust. Which means marginally less exports but who cares. Let the economy climb the value chain. Which Thailand has been doing mostly.

Sorry, it seems that you know so much about Thailand and it's business life like the one from the kindergarten^...

**havnfun** · 23-08-2021, 03:20 AM

Wo, wo, guys, Thailand has been here before, 1996 rings a bell, ask any Thai that was in finance back then what they think of George Sorros?

**Klondyke** · 23-08-2021, 09:10 PM

Thai exports rise 20.3% year-on-year in July, beating forecast

10:59 AM MYT

Image from The Nation Thailand/ANN

BANGKOK, Aug 23 (Reuters): Thailand's exports rose a bigger-than-expected 20.27% in July from a year earlier, as global demand improved, the country's commerce minister said on Monday.

That compares with a forecast for a rise of 19.7% in July in a Reuters poll and after a rise of 43.82% in June.

Thai exports rise 20.3% year-on-year in July, beating forecast | The Star

**DC101** · 24-08-2021, 07:38 AM

Still shorting THB poor performance, inefficient government, political instability

**tomcat** · 24-08-2021, 08:48 AM

Originally Posted by DC101

Still shorting THB poor performance, inefficient government, political instability

...these weren't hindrances to economic expansion before covid...local and foreign investors are hound-like in their ability to find work-arounds...while Thai bureaucrats and politicians trip over themselves trying to subvert the regulations in place...raw capitalism is a knowing beast when it comes to human frailty...

**Shutree** · 24-08-2021, 01:58 PM

Published export numbers up.
Published Covid numbers down.

Baht up 1% so far today.

**Backspin** · 25-08-2021, 09:56 AM

Originally Posted by DC101

Still shorting THB poor performance, inefficient government, political instability

Baht up 1% so far today.

**Backspin** · 25-08-2021, 09:58 AM

Originally Posted by havnfun

Wo, wo, guys, Thailand has been here before, 1996 rings a bell, ask any Thai that was in finance back then what they think of George Sorros?

In 1997 Thailand was a dual debtor nation with a hard pegged currency. Apples and oranges.

**Shutree** · 25-08-2021, 02:22 PM

Originally Posted by Backspin

Baht up about 2% against the USD so far this week.

Thread: Baht Battered

Thread Tools

Display

Baht Battered

Thread Information

Users Browsing this Thread

Posting Permissions