In April, the Baht’s depreciation eased, buoyed by the strengthening momentum of the Thai economy. A senior executive at the Bank of Thailand anticipates a potential strengthening of the local currency in the latter half of 2024.
During the first quarter of 2024, the Baht weakened by 7.8% against the US Dollar, ranking as the second-largest depreciation in Asia following the Japanese Yen, which saw a decline of 9.6%. The South Korean Won followed as the third most depreciated currency in Asia, down by 6.5%.
Despite these figures, it was noted by Sakkapop Panyanukul – the senior director for financial markets at the Bank of Thailand – that the Baht’s depreciation eased in the previous month, falling by 1.7% against the Dollar, while the Won decreased by 2.2%.
Year-to-date, the Dollar has shown an average appreciation of 4.4% against global currencies. Recently, the Baht hit a low of 37 against the Dollar, the weakest it has been in 6.5 months. This depreciation is in line with other regional currencies, primarily influenced by the strength of the Dollar, as mentioned by Mr. Sakkapop.
He pointed out the expectations of the US Federal Reserve postponing policy rate cuts, which could strengthen the greenback against other currencies globally. Forecasts suggest a single rate cut by the Fed this year, potentially to 4.99%.
The Bank of Thailand foresees a gradual improvement in Baht depreciation against the Dollar in the latter half of the year, in sync with the country’s economic progression. Expected drivers include tourism, private consumption, and government spending.
Anticipated factors contributing to economic growth include the initiation of the government’s budget disbursement for fiscal 2024 in the second quarter, alongside an estimated rise in foreign tourist arrivals to 35.5 million this year from 28.2 million in 2023.
Private consumption is projected to expand by 3.5%, a slower pace compared to the previous year’s 7.1%, primarily due to a high base effect. Even with the Finance Ministry lowering its economic growth forecast for the year, the Bank of Thailand remains optimistic about achieving its projection of 2.6% growth, as per Mr. Sakkapop.
Despite challenges posed by a slowdown in March due to softer domestic demand and tourism, signs of progress were noted in the Thai economy during the first quarter compared to the previous year. However, growth is expected to be modest on a year-on-year basis, suggests the regulator.
The service sector, particularly driven by tourism, continues to play a vital role in economic activity, leading to increased employment opportunities as per the central bank’s observations.
