Relentless baht raises worries

Thailand’s export and tourism sectors are bracing for tough times in light of the baht’s strong rally against the US dollar, while authorities are brainstorming for the best policy options.
The Thai National Shippers Council said it would soon need to lower its export-growth target for this year to only 5.5 per cent from 7.5 per cent because of the rapid strengthening of the baht and the government’s tardiness in drafting a strategy to help the export sector, which contributes 70 per cent to the country’s gross domestic product (GDP).
Vallop Vitanakorn, a vice chairman of the Thai National Shippers Council, said government agencies had no new plan to promote exports, but only wanted to drive shipments to Asean and new markets. However, Asean markets rely on imports of semi-finished goods and raw materials, so Thai shipments to Asean would not increase as much as the government had expected.
In the tourism sector, the Association of Domestic Travel said some local tour operators had been troubled slightly because they earn income in US dollars. Tourism operators are watching the baht’s rise closely and have expressed concern that if the current trend continues, the industry may feel a bigger pinch. Thailand’s visitor arrivals crossed the 22.3-million mark for the first time last year and the number is expected to increase to 24.5 million this year.
The Tourism Authority of Thailand said there was no sign yet of the appreciating baht taking a toll on the industry.
Yesterday, Prime Minister Yingluck Shinawatra directly asked the Bank of Thailand to monitor the skyrocketing baht very closely while the central bank said it had several control measures up its sleeve.
“The prime minister expressed concern for those affected, particularly SMEs [small and medium enterprises] in industries that may be hurt. Appropriate relief measures may be introduced if necessary,” BOT Governor Prasarn Trairatvorakul said after a meeting of economic agencies.
Last week, Prasarn said, the BOT asked financial institutions that act as a custodian of foreign investors’ securities for lists of those investors. This could help the central bank to improve its evaluation of the whole situation. The central bank has also asked banks to assist SMEs by offering advice and extending loans.
Amid the zooming baht, the BOT is also tracking capital inflows in terms of categories and trading patterns.
In intraday trade yesterday, the baht touched 28.88 per US dollar, its highest in 16 years. The baht has hit a new high for three consecutive days. With a 5.4-per-cent gain so far this year, it has been the best performing among 11 Asian currencies. Year to date, searching for higher returns in emerging markets, global funds have bought Thai bonds worth US$10 billion or Bt300 billion. Their bond holding accounts for nearly 20 per cent, compared to 2 per cent before the sub-prime crisis in 2008.

reduce external debt
Areepong Bhoocha-oom, permanent secretary at the Finance Ministry, said the BOT and the ministry would join hands to keep tabs on capital inflows and inform state agencies and state enterprises not to borrow offshore for their projects.
Any state unit with external borrowings will be asked to reduce its external debt and state units are being asked to accelerate foreign loan disbursements.
State units show foreign-currency expenditure of about Bt100 billion. To boost investment in other countries, the ministry discussed with the central bank about relaxing regulations to facilitate overseas investment.
The inflow of foreign capital was not a cause for concern, as most of the money went into government bonds.
For now, it is not necessary to employ capital control measures, as used in the past, as doing so could trigger panic and international investors could lose their confidence in the country, he added.
Currency appreciation is commonplace and does not apply only to Thailand, said Chantavan Sucharitkul, an assistant BOT governor. The baht gained 2.5 per cent in a month, while Iceland’s currency strengthened by 6.7 per cent, Mexico’s peso by 4 per cent and Malaysia’s ringgit by 2.6 per cent, she said.