Agency estimates blow to industry from strong baht
The Office of Industrial Economics is concerned that if the baht this year averages 28 per US dollar, it will hurt industrial GDP by 3.59 per cent.
Industry Ministry spokesman Nattapon Nattasomboon said that according to the office, the strengthening of the currency has put pressure on the export of industrial products, already hit by the slowing economies of trading partners.
The Thai currency advanced 0.2 per cent to 28.78 per US dollar as of 4.07pm yesterday in Bangkok, according to Bloomberg. It touched 28.75 earlier, the highest level since the devaluation in July 1997 that sparked the Asian financial crisis. The baht has appreciated 6.3 per cent this year, the most among Asia’s 11 major currencies.
The rise in the baht during the past two months has resulted in a decline of industrial-product exports by Bt35.48 billion. If its value stays at Bt29 per dollar, this is estimated to reduce export value by Bt384.799 billion and affect the industrial gross domestic product by 1.1 per cent. If the exchange rate stays at Bt28, the value of product exports will drop by Bt569.373 billion and lower industrial GDP by 3.59 per cent.
The office has targeted growth in industrial GDP this year of 5-6 per cent on the assumption of the baht being worth 30.58 per dollar on average. If the average is 29, industrial GDP will expand by 4-5 per cent, and only 1.41-2.41 per cent if the rate is 28.
Nattapon said the ministry planned to propose to the Cabinet next Tuesday ways to help small and medium-sized enterprises affected by the rising baht and the increase in the daily minimum wage.
Meanwhile, the Federation of the Thai Industries will call a meeting next week to discuss relief measures to be proposed to the government for industries that suffer adverse impacts as the baht has appreciated faster than its regional peers.
FTI chairman Payungsak Chartsutipol said the federation “will have a discussion with industry representatives on April 24 and assess any impact that arises from the baht’s appreciation, which is higher than [the currencies of] 10 rival [exporting] countries.
Those using high amounts of local content or raw materials and producing goods for exports have been affected most.
“We need the government to oversee the baht so that it moves with less volatility, not strengthening or weakening swiftly and not appreciating more than rival countries.”
From January 1 to April 10, the baht appreciated by 5.02 per cent against the US dollar, the highest of 10 countries with which it competes in the world market, according to the FTI. China’s yuan gained 0.74 per cent, India’s rupee 0.69 per cent and Malaysia’s ringgit 0.10 per cent.
In the corresponding period, the Hong Kong dollar weakened 0.17 per cent, the Philippines’ peso 0.44 per cent, Vietnam’s dong 0.69 per cent, Indonesia’s rupiah 0.97 per cent, the Singapore dollar 1.47 per cent, the New Taiwan dollar 3.68 per cent, South Korea’s won 7.53 per cent and Japan’s yen 15.05 per cent.
Payungsak complained that the baht’s rapid movements were mostly by foreign capital pouring into Thai equities and bonds, while not assisting the economy like foreign direct investment. He added that seven relief measures for the private sector, proposed to the government this year, had not been implemented yet.
According to a survey by the FTI last month, the Thai Industries Sentiment Index fell to 93.5, the third consecutive drop, from 95.5 in the previous month on concern over the appreciating baht, the global economic situation, high energy costs and domestic political impacts. The index covers 1,065 enterprises in 42 industries.
The three-month index also dropped to 99.3 from 103.1 in February as businesspeople were worried about the baht’s movement, the global economic situation and falling oil prices.
Prime Minister Yingluck Shinawatra yesterday called in state economic agencies to report to her on the situation related to gold and the baht.
Finance Minister Kittiratt Na-Ranong said the plunging gold price was the psychological effect in response to reports of some central banks’ attempts to unload gold reserves to solve debt problems.
He added that the gold situation would not have a massive impact on the people.
He believes that those who suffered losses from buying gold at its previously higher price would not feel the effect until they slowed down spending or consumption.
