BANGKOK- Thailand’s exports are expected to rise 2 percent this year, the upper end of a previous forecast of 1 percent to 2 percent growth, but the rapidly strengthening baht could be a challenge for the rest of the year, the Thai National Shippers’ Council said on Tuesday.
The baht reached its highest level in 31 months this week trading at 32.125 against the greenback. Year-to-date, the baht has risen 5.2 percent, making it the region’s second best-performing currency after Malaysia’s ringgit.
The rapid appreciation of the baht was hitting exporters and tourism spending, the central bank said on Monday, and that it had managed the baht’s volatility.
“The baht’s appreciation is too fast when compared with our partners and competitors,” said Chaichan Chareonsuk, chairman of the council, adding the currency’s strength would hit agriculture and food shipments.
“This is the biggest risk … there are no supportive factors in the final stretch, we have to fight to drive exports.”
In the first eight months of 2024, exports rose 4.2 percent from the same period a year earlier, helped by a weaker baht, Chaichan said.
Exports, a key driver of the economy, fell 1 percent in the whole of 2023. They rose 7 percent in August, though the baht’s rise is expected to impact fourth-quarter shipments.
Exporters also urged the government to further delay plans to raise the minimum wage.
“This would impact the cost structure and our competitiveness. It should be delayed further, don’t consider it now,” said Chaichan.
The government so far has delayed plans to increase the daily minimum wage in October, which would rise by 8 percent to 20 percent, depending on the region.
A rapid appreciation of the Thai baht is hitting exporters and tourism spending, the central bank said on Monday, adding that the currency was gaining due to a weak dollar in the face of stronger regional currencies like the Yuan and Yen.
The baht hit its highest level in 31 months on Monday, at 32.235 against the greenback. It has risen 5.8 percent year-to-date, the region’s second best performer after Malaysia’s Ringgit.
Exports and tourism are key drivers of Southeast Asia’s second-largest economy.
The baht’s rapid rise comes ahead of a meeting between the central bank and Finance Ministry this week, where the Thai currency’s performance and the country’s inflation target are expected to be discussed.
The meeting, first reporter by Reuters, follows months of government pressure on the BOT to cut interest rates and align with fiscal policy aimed at stimulating the economy.
The central bank has so far resisted calls for a cut, holding rates unchanged at 2.50 percent for a fifth straight meeting on last month, and has said a cut was not necessary. The next rate review is on Oct. 16.
The central bank had managed the baht’s volatility, BOT assistant governor Chayawadee Chai-anant told reporters.
The stronger baht was impacting exporters when converting profits back to baht, she said, adding that it would also hit tourism spending.
Exports in August rose 11.4 percent from a year earlier while imports were up 8.5 percent, resulting in trade account surplus of $2.4 billion, the BOT said.
The current account surplus was $1.4 billion in August, up from a revised $0.1 billion surplus in July, due to accelerated exports of agriculture products to trading partners who faced shortages, the BOT said.
The economy grew at a faster pace of 2.3 percent in the April-June quarter on the year, but analysts said fiscal policy uncertainty clouded the outlook.
The BOT has forecast economic growth of 2.6 percent for 2024, after last year’s 1.9 percent expansion, which lagged regional peers.