Strong Baht Sparks Alarm Among Thailand’s Top Economic Officials

Top Thai economic officials sounded alarm over the baht’s surge to a five-year high, with the finance minister calling it a “very big concern” and the central bank chief saying that efforts to rein in the currency have had limited impact.

“Thailand is a small, open economy and we’re a net-export country, so baht appreciation affects our economy,” Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas said in a Bloomberg TV interview with Haslinda Amin on the sidelines of the World Economic Forum in Davos Wednesday.

The Thai currency is trading at around 31 baht per US dollar, close to its strongest level in five years. According to Ekniti, every one-baht gain against the greenback would shave about 0.1 to 0.2 percentage point off Thailand’s gross domestic product growth, which he expects to expand by about 2% this year.

Baht Surge Worries Thai Economic Managers

Currency at five-year high threatens exports, tourism

The finance chief said the baht’s strength was due to a weaker dollar, Thailand’s large current-account surplus and “speculative flows.” He said officials are trying to ease the pressures by boosting foreign investment and curbing speculative activity linked to gold trading.

Separately on Wednesday, Bank of Thailand Governor Vitai Ratanakorn told reporters in Bangkok that the central bank’s intervention in foreign exchange market has had only minimal impact on the baht, citing the market’s size and the limits of its influence beyond onshore activities.

“We don’t have enough power to set the baht level, to make baht weaken like others want,” he said.

The baht retreated from its highest level since 2021 after his comments.

The Thai currency gained about 8% last year as broad dollar weakness and gold’s roughly 65% surge to a series of records helped offset weak domestic economic fundamentals. Thai authorities have warned of a punitive tax and greater scrutiny of bullion trading as a stronger baht hurts the nation’s exporters and tourism.

Ekniti has worked with the Bank of Thailand to give the central bank clearer authority to oversee online gold trading in baht, a segment officials say has had an outsized impact on the local currency.

The central bank is set to unveil a set of new rules for online trading of baht-denominated gold on Jan. 29 to help cool the currency’s rally, Vitai said, adding that a daily trading limit of 50 million to 100 million baht for individuals was under consideration.

Election

Thailand is heading into a Feb. 8 general election with major political parties pledging measures to revive a sluggish economy forecast to expand at the slowest pace in a decade excluding the pandemic-driven contraction in 2020.

The country faces multiple headwinds, including the impact of US tariffs, baht rally, high household debt, and delays in fiscal spending, all of which have weighed on growth and investor sentiment.

Ekniti, who joined the government in September last year, has emerged as a key economic figure aligned with the ruling Bhumjaithai Party and has helped shape its policy platform.

The party’s agenda focuses on boosting growth and easing cost-of-living pressures through a package of populist and stimulus-oriented measures. Still, his government’s commitment to a medium-term fiscal plan would help the country avoid credit rating downgrades, Ekniti said.

By Suttinee (Ying) Yuvejwattana and Randy Thanthong-Knight with assistance from Haslinda Amin, Matthew Burgess, and Pathom Sangwongwanich