In a note on July 23, the Japanese bank pointed to “uncharacteristic under-performance of the Thai baht, rendering it the “worst performer to date in 2021”, reports state news agency NNT.
Thai baht was the top performer in Asia before the pandemic. In 2019, the country was concerned about the strengthening Thai baht, which was buoyed by its large trade surplus. A stronger currency makes Thailand’s exports more expensive, causing them to be less attractive in global markets.
According to Refinitiv Eikon data, the Thai baht has steadily plunged more than 10% against the US dollar year-to-date in 2021. This makes it the weakest-performing currency this year compared to other major Asia Pacific currencies. Against the greenback, the Japanese yen is nearly 7% lower, the Malaysian ringgit declined by 5%, while the Australian dollar is down 4.43% in the year-to-date, NNT reported.
Even though tourism decline is not the only factor driving Thailand’s economic slowdown, Mizuho Bank pointed out that the sharp decline in tourist arrivals has multiplied the “Covid devastation” of its economy. Tourist spending accounted for about 11% of Thai GDP in 2019, the report added.
According to data from the Ministry of Tourism & Sports as well as the World Bank, Thailand had only a little over 34,000 tourist arrivals as of May 2021, compared with over 39 million in 2019, before the pandemic. Fewer tourists also means lower demand for the Thai baht, the report explained.
Thailand’s over-reliance on tourism is going to be “very challenging” for the country as it seeks to reopen to tourists while still battling the pandemic, Nomura’s Chief ASEAN Economist Euben Paracuelles said last week, the report added.
The dire report on the value of the Thai baht came as Thailand’s Finance Ministry slashed its economic growth forecast for 2021 to 1.3%.
The Finance Ministry slashed its forecast to 1.3%, from 2.3%, in its third such revision this year, as Thailand fights its biggest COVID-19 outbreak to date, NNT noted in a separate report.
Fiscal Policy Office Director-General Kulaya Tantitemit said the current outbreak is impacting economic activity and the expected number of foreign tourists this year, but improved exports and fiscal measures will lend some support.
She said, although Thailand is preparing to reopen, the ministry now expects only 300,000 foreign tourists this year, down from an earlier forecast of 2 million.
According to Ms Kulaya, the government expects to use B200 billion, of a new B500bn borrowing plan this year, to finance stimulus measures.
The Finance Ministry is also ready to implement additional support measures, as appropriate, as the fiscal position remains strong and that the public debt to GDP ceiling of 60% can be raised if necessary, Ms Kulaya said.