Investors have been forewarned by Kasikornbank (KBank) that baht volatility may grow over the course of the upcoming month due to political risk and the emergence of a new administration. The bank predicts that due to different internal and external variables, the baht will vary between 33.80 and 35.40 per US dollar throughout this time. The direction of the US Federal Reserve’s policy rate is the main factor.
After the next four weeks, according to KBank, domestic politics will have an impact on baht volatility. In September and December of this year, the Federal Reserve is anticipated to increase its policy rate by a quarter of a percentage point each time. Kobsit Silpachai, head of KBank’s capital market research division, said “domestic politics is a risk factor that could lead to baht fluctuation against the dollar.” Investors are apprehensive about the new coalition government’s formation due to the general election’s unpredictability.
The baht is expected to strengthen to 33.8 by the end of this year, notwithstanding potential short-term volatility against the dollar. The second half of the year is likely to see the baht appreciate due to the anticipated tourism-driven economic recovery.Thai GDP is expected to grow by 3.7% in fiscal 2023, according to KBank, with an expected increase in foreign arrivals of 28.5 million from 11.2 million in the previous year to 28.5 million. The overall number of international arrivals in the first four months of this year was 8.6 million. This year, the National Economic and Social Development Council expects GDP to expand by 2.7%.
Additionally, according to Kobsit, the Bank of Thailand is anticipated to raise its policy benchmark rate this month from 1.75% to 2% by 0.25% points.KBank anticipates that, barring a large increase in inflation, the central bank will keep its policy rate at that level for the duration of the year.
The central bank may lift its policy rate over 2% this year if the incoming administration follows through on its promise to raise the daily minimum wage amid growing inflation. The central bank plans to implement the economic policies of the new administration. Thailand’s minimum salary in 2022 was US$293 per month, higher than Malaysia’s US$275 and Vietnam’s US$193, but lower than Indonesia’s US$307 and the Philippines’ US$308.
