For several years there have been calls for the Thai government to intervene in the price of the Thai Baht with the currency significantly strengthening against major currencies. Naturally, many of these calls have been made by foreigners or Thais connected to the tourist industry. While some may have been looking through rose-tinted glasses in the hope that their voices would be heard, after all, Thailand doesn’t rely on tourism, seemingly on the outside at least, devaluing the currency would have made sense.
Other currencies have weakened
The Thai Baht has certainly been appreciating but other currencies, particularly those used by westerners, have generally been depreciating. Sterling has fallen dramatically since the Brexit vote on 23 June 2016 when the exchange rate was THB52.25 to £1; today it is THB40.68. The US dollar has had a mixed time of things, generally being stronger since the election of President Trump, again in 2016.
The Australian Dollar and Euro have both also fallen in value over the same period although to a lesser extent than sterling. Naturally, this has made Thailand a more expensive place to come for western tourists, arguably the objective of the Thai government in their plans to attract “quality” tourists. This is not forgetting the Rouble’s dramatic crash in line with falling oil prices between 2014 and 2017.
Are other currencies recovering or Thai Baht weakening?
Since the middle of July, we have started to see signs that perhaps the Baht is weakening. Sterling, Euro and Australian Dollar all made gains, and although they have slowed, the trend has generally been upwards. The US dollar has remained pretty much stable if anything, falling slightly in value, but the changes has been negligible. However, the fact that three major currencies have made several percentage gains suggests it is the Baht that is weakening rather than other currencies strengthening.
Has COVID-19 played a role?
It would be hard to find any substantial evidence to suggest that the coronavirus has been attributed to this fall. After all, Thailand has had fewer cases than most other countries and other than their policy not to allow foreigners into the country (a big factor) has been largely unscathed. The primary beneficiaries from a falling Baht would-be exporters and foreigners, two groups that can often go largely ignored by the powers that be who prefer to retain a strong currency for investment purposes.
What benefits are there for Thailand if the Baht fall?
As mentioned exporters would be the biggest beneficiaries at this time which would, of course, help Thailand’s Balance of Payments (BoP) although politically this doesn’t appear important. Despite the comments of many expats on the popular forums, Thailand WILL want foreigners back when they feel the time is right. However, as a country, they will need to understand that people have less money in their pockets than pre-COVID. Thailand can’t be viewed as “expensive” otherwise people simply won’t be able to afford to come. When the barriers come up, perhaps then we will see a devaluation, or maybe this is just wishful thinking?