The Thai baht lost 10% against the dollar in the first three months but since then has gained back 2%. Exports and economic performance are still linked to its value. Thailand’s Deputy PM Somkid Jatusripitak is calling on the Bank of Thailand to keep up its efforts which began at the start of the year, to make the Thai currency more competitive.

Thailand’s Deputy Prime Minister Somkid Jatusripitak is calling for vigilance to keep the Thai baht under control as the latest trade figures from the Ministry of Commerce show that it may have been a factor in an unexpected rise in Thai exports in the first quarter of 2020. Thailand is reeling right now from the expected loss of 10 million jobs as well as a stalled domestic economy and tourism sector. The ability of its export and tourism earnings to rebound when the economy reopens will be the critical factor if a major contraction in GDP for the year is somehow to be avoided or even minimised.

Deputy Prime Minister Somkid Jatusripitak has underlined the importance of keeping Thailand’s currency competitive as the country reels in the aftermath of the virus lockdown but counts on improved export performance when the economy opens back up. The Ministry of Commerce released figures this week for the first quarter which were surprisingly positive. Director-General of the Trade Policy and Strategy Office, Pimchanok Vonkorpon, has highlighted what the ministry sees as positive prospects particularly for Thailand’s agricultural and processed foods sector.

Thailand’s Deputy Prime Minister has voiced his support for efforts by the Bank of Thailand to rein in the Thai baht at this time as he pointed to the continued dependency by the kingdom’s economy on trade and tourism.

Somkid Jatusripitak made his remarks as figures released this week by the Ministry of Commerce show Thailand made a gain in exports over the first three months of the year in the order of 0.93% and particularly for March when exports rose by 4.12% to reach $22.4 billion.

Lockdown will have impacted exports since March 26th state of emergency even with open trade

Thailand has been trying to keep its export-based economy going during the lockdown with trade remaining open.

However, it should be noted that severe lockdown and restrictions were only introduced after the March 26th declaration of a state of emergency.

Economic devastation in western countries will also impact Thailand and it’s export potential

Nevertheless, the first quarter’s figures do point to brighter prospects but all now depends on the trajectory of this tricky and unpredictable virus pandemic not necessarily in Thailand but in western countries and regionally in Asia.

Deputy Prime Minister Somkid conceded this point during his comments on Wednesday.

‘If the situation in Europe and the United States continues like this, it’s impossible that the Thai economy will get back to normal quickly,’ he told reporters. ‘It’s impossible for exports to bounce back this year and the same for tourism’

Baht devalued by over 10% to April 1st this year but since has gained back 2% of its value

One of the reasons for the boost in exports in the first three months was a devalued baht which lost over 10% of its value from the start of the year to April 1st when it briefly went above ฿33 to the dollar.

However, what must be of concern now is that since then, the baht has gained in a steady trend by over 2%. 

As Thailand entered into 2020, its most important economic objective was a lower baht. To that end, the Bank of Thailand had begun a programme of relaxing capital outflow rules as well as other mechanisms to encourage a more market-orientated and competitively priced currency.

These efforts will become important again if the trend, seen since April 1st, continues.

Some observers have linked the drop in the baht to the dip in Chinese economic activity

Some commentators have noted a link with the baht’s performance to the outlook and situation in China as the baht’s devaluation corresponded with the emergency in Thailand’s northern neighbour and second-largest export market. The baht’s recent strengthening also coincides with efforts to revive that economy.

There seems to be some link here that was not previously acknowledged and that warrants further exploration by economic analysts.

First-quarter saw increased demand for Thai food products abroad and a rise in exports of computers, air conditioners and gold

The boost in Thai exports in the first quarter was driven by increased demand for Thai food products abroad but also of gold which is being exported from Thailand to satisfy a growing demand during this period of massive uncertainty worldwide.

Thailand also saw large gains in the output of computer products which saw nearly an 8% gain in the first quarter but over a 17% rise in March. There was also a gain for the air conditioning industry with the quarter’s exports rising nearly 14% and over 8% in March.

Thailand saw large decreases in exports of cars, oil, machinery, plastics and chemical products.

Deputy PM Somkid under no illusion about the severe impact of lockdown measures which may see 10 million out of work in the aftermath 

Mr Somkid, in his comments, seemed to suggest that some restrictions or lockdown measures will stay in place as he predicted more government stimulus measures in June based on the kingdom’s current plans to borrow up to ฿1 trillion on the markets.

He said that this would be used to boost domestic consumption and commented that Thailand may lose up to 10 million jobs in the aftermath of this coronavirus shutdown and a worldwide economic depression which is already impacting western countries. 

Funds to be used to buy shares in firms related to the tourist sector that are critical to the economy

Somkid outlined that some of the funds will be used to arrange share purchases in some companies which have suffered badly from the coronavirus downturn and which are considered essential to the country’s tourist sector which continues to be rocked by the ongoing closure of the industry.

Baht must be kept competitive

The Deputy PM emphasised the importance of a competitive currency to Thailand’s export market and the tourist sector when the market reopens.

‘On the currency, I’ve asked the central bank to ensure it is competitive and has a trade advantage,’ he said. He was particularly conscious of the competition that Thailand will face on all fronts from other countries in Asia such as Malaysia and Vietnam when trade and tourism open back up.

Commerce Ministry optimistic about export prospects for 2020 despite the coronavirus impact

Over at the Ministry of Commerce, the Director-General of the Trade Policy and Strategy Office, Pimchanok Vonkorpon, said the government was more optimistic than most forecasters about Thailand’s export prospects for 2020.

Exports are critical to economic performance in Thailand particularly as tourism has been decimated

This will have a direct and corresponding impact on the country’s economic performance.

Current forecasts suggest that exports from the kingdom will be down by 8 to 10% this year and some economists think this is an optimistic scenario. The economy, according to the IMF, is expected to contract by 6.7% this year or even worse.

The ability to moderate this will be down to success on the export markets as the kingdom’s ability to open up its tourism industry, about 12% of GDP, will be limited by the virus both at home and abroad.

Agriculture produce and processed food exports a winner for Thailand this year as demand grows

Ms Pimchanok was encouraged this week by the lower value of the Thai baht and demand for food and agricultural produce from Thailand. 

‘The spread of the coronavirus has highlighted the growing demand for agricultural products and processed foods,’ she observed.

Official looks to a revival of the Chinese economy

The ministry official was also looking forward to the Chinese market coming back to normal at the end of this month and boosting companies linked to its supply chain. 

‘China is also recovering from the outbreak, and its production is expected to reach full capacity by the end of April, which would benefit Thai exports in the related supply chain, while the weakening baht will support the export of products with high price sensitivity,’ Ms Pimchanock predicted.

That prediction, however, like this virus, may prove a little tricky based on the performance of the Thai baht since April 1st when it closed at ฿33.09. Today it closed at ฿32.36.

Further reading:

Government begins looking at borrowing options to fund huge ฿1.9 trillion economy rescue package

UK ex WHO director warns of 2 to 3 years of chaos as IMF sees Thailand as the hardest hit economy in Asia

Government moves to clarify that it is not seeking cash from the kingdom’s richest business leaders in overture

Challenge of defeating both a health and economic emergency a big ask for Thailand’s government in crisis mode

Thailand and US aim for a new more ‘proactive’ trading relationship as ambassador meets Prayuth

Thailand faces a third shock after the virus if high debt and the informal economy are not prioritised