Thailand’s currency wilts as virus wreaks havoc on tourism

Thailand updates

Thailand’s baht has gone from being one among Asia’s strongest currencies earlier than the pandemic to one among its worst performers this 12 months because the coronavirus disaster ravages its essential tourism sector.

The Thai foreign money is down greater than 9 per cent towards the greenback for the reason that finish of 2020, inserting it amongst this 12 months’s weakest performers globally alongside friends such because the Turkish lira and Peruvian sol.

The loss of tourism dollars on which Thailand’s economic system depends, mixed with a wave of Covid-19 infections that has quashed hopes of a fast financial restoration, have turned previously bullish patrons of its belongings into bears. 

“The baht is uniquely uncovered to the collapse in cross-border companies, and clearly tourism is the large one,” mentioned Mark Baker, funding director with Aberdeen Normal Investments. “That quantity has mainly collapsed to zero, and there was a large stability of funds shock.” 

In 2019, the final pre-pandemic 12 months, Thailand hosted a file 40m overseas guests. Tourism was a dependable supply of overseas change that saved the present account in significant surplus, and overseas buyers’ curiosity within the baht, excessive. Because the begin of the pandemic, the reversal of fortunes has been stark. 

Within the 12 months to the tip of June, Thailand’s present account deficit was $2.2bn, a “huge turnround” from the $40bn surplus the nation reported earlier than the pandemic, mentioned Khoon Goh, head of Asia analysis for ANZ in Singapore. 

Bar chart of Year to date % change against US dollar showing Thailand’s currency lags far behind Asian peers in 2021

“One of many main drivers of baht power pre-pandemic was its giant present account surplus, pushed largely by the tourism sector,” Goh mentioned. “That’s gone now: it has utterly disappeared and gained’t come again for a very long time, given what’s occurring.”

Prayuth Chan-ocha, Thailand’s prime minister, has promised to reopen the nation — which sealed its borders to most travellers in March 2020 — to worldwide guests by October.

Phuket, Thailand’s largest island, final month launched a “Sandbox” scheme designed to start admitting vaccinated overseas vacationers and meant to function a mannequin for different resort areas in search of to reopen. 

Nevertheless, arrivals have lagged tourism authorities’ extra conservative forecast. Many Thais doubt Prayuth’s October reopening goal will probably be met.

Line chart of Current account balance (rolling 12 months, $bn) showing Tourism fall prompts balance of payments ‘shock’ in Thailand

Day by day reported Covid infections, blamed totally on the extra infectious Delta variant, are at file ranges of virtually 20,000 and semi-lockdown restrictions on work, journey and leisure are in impact in Bangkok and a swath of different severely hit “darkish crimson” provinces. 

Market analysts mentioned overseas investments by Thai firms had been additionally weighing on the baht, as had been world traits, together with stress on rising markets prompted by expectations that the robust US financial restoration will immediate the Federal Reserve to start reining in its huge financial stimulus.

“Folks had been anticipating by the tip of the 12 months we may have a restoration of tourism, however it’s fairly clear now that this isn’t going to occur,” mentioned Pipat Luengnaruemitchai, chief economist at Phatra Securities in Bangkok. “We don’t consider we are able to open to tourism extra meaningfully till the second half of subsequent 12 months.”

Observe John Reed on Twitter at @JohnReedwrites.

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