The Federation of Thai Industries (FTI) is calling for urgent action to address the appreciation of the baht, which poses a threat to the country’s vital economic sectors, including exports and tourism, particularly as businesses grapple with an unstable domestic economy.
FTI Chairman Kriengkrai Thiennukul expressed concerns about baht volatility following its rise to a 19-month high against the US dollar. On September 23, the baht opened at 32.92 per dollar, compared to 33.60 baht at the close on September 20. As of yesterday, the average exchange rate was reported at 32.68 by the Bank of Thailand. The currency, which was trading near 37 to the dollar in late June, has appreciated significantly since then.
“This situation is detrimental for manufacturers competing with neighboring countries in the global market,” Mr. Kriengkrai stated.
He noted that Thai businesses face increasing financial pressures due to high lending rates domestically, which hinder their ability to fully leverage free trade agreements (FTAs) compared to countries like Vietnam that have signed more FTAs. He also pointed out that businesses are burdened by elevated energy costs.
“Agricultural and food exporters are feeling the impact of a stronger baht, which results in reduced profit margins,” he explained. “Many manufacturers in these sectors are unable to innovate and enhance their product offerings, leading to compressed profit margins.”
Mr. Kriengkrai attributed the recent rise in the baht’s value to the US Federal Reserve’s decision to cut interest rates by 50 basis points.
According to the FTI, the Thai Industries Sentiment Index fell to 87.7 points in August, reflecting economic stagnation, a strengthening baht, and the repercussions of severe flooding in the North. Manufacturers expressed concerns about exports in August as the exchange rate rose from 36.46 to the dollar in July to 34.92 last month.
The increase in export prices due to a stronger baht is raising apprehensions among entrepreneurs, particularly in light of high household debt levels and the government’s policy to raise the daily minimum wage to 400 baht, which could further burden labor-intensive businesses.
The FTI is urging the government to implement new measures to support manufacturers, especially small and medium-sized enterprises (SMEs), in navigating the current economic challenges.
“Exporters and SMEs are struggling to compete with counterparts in neighboring countries, and foreign tourists may find it less appealing to buy products and services in Thailand as prices rise,” noted Mr. Kriengkrai.
A source from a prominent inbound tour operator, who preferred to remain anonymous, expressed concern about the baht’s earlier appreciation against other Asian currencies, suggesting that it could make Thailand a less attractive destination for tourists, who might consider opting for countries like Japan instead.
