Thailand: Weak baht aids tourism resurgence and growth: Arkhom

A weaker baht is supporting Thailand’s post-pandemic tourism recovery, which is key to shoring up the nation’s economic performance, according to Finance Minister Arkhom Termpittayapaisith.

“Thailand is value for money,” Mr Arkhom said in an interview on the sidelines of the Asia-Pacific Economic Cooperation (Apec) finance ministers’ meeting in Bangkok, highlighting the nation’s appeal to travellers looking for bargains. The baht’s prolonged weakness will “surely” help get more foreigners back, he said.

The weakness in the baht — Southeast Asia’s second-worst performer this year — may linger through 2024, he said.

The baht is still competitive, and the Bank of Thailand (BoT) need not worry about capital outflows as much as other economies, he added. The currency fell 0.2% against the dollar at 2.18pm local time, halting two days of gains.

Mr Arkhom’s comments suggest that the benefits of a weaker currency outweigh the negatives at the moment for the tourism-reliant economy, and that the central bank’s measured approach to tightening monetary policy was appropriate in a world where central banks led by the United States Federal Reserve are employing large interest-rate hikes to fight inflation.

The finance chief, who does not see the Fed halting rate hikes anytime soon, said the BoT’s gradual tightening — two 25-basis-point increments last quarter — is helping recovery to gain traction, even as inflation is near a 14-year high.

Gross domestic product is seen to rise 3.7% next year, faster than the 3%-3.5% pace projected for 2022, thanks to the return of foreign visitors, according to Mr Arkhom. 

– Dollar flows –

Economists at DBS Bank in Singapore expect Thailand’s tourism recovery to gain “further traction” next year and support a 4.2% growth pace. Fitch Ratings sees a Thai expansion similar to DBS and said it’s one of the few where growth is projected to accelerate in 2023. “The recovery of tourism is gaining momentum,” Fitch said.

As tourism revenue comes back, more dollars will flow in to support the baht and the current account and to rebuild reserves that have plunged to a five-year low due in part to revaluation, it said.

Thailand, where tourism accounts for 12% of GDP and a fifth of jobs, is betting that “revenge spending” by foreign visitors lured by its broad reopening will help rev up recovery. Its growth is trailing regional peers after two years of the Covid-19 pandemic kept tourists away, costing billions of dollars in an economy that hosted as many as 40 million overseas a year before the virus outbreak. 

The country is seeing more visitors from neighbouring countries as well as India and the Middle East to help offset the absence of Chinese nationals restricted by Beijing’s lockdown.

Before the coronavirus pandemic, Chinese nationals accounted for almost 30% of overseas visitors. Officials said arrivals totalled 6.48 million this year through Oct 9.

The government is considering some targeted stimulus by year-end and is likely to implement more measures, or extend existing ones to protect households from higher energy costs, Mr Arkhom said. 

While a net oil importer, the country is a food exporter and doesn’t have to worry about food security unlike other nations.

Many businesses in Thailand are happy with the baht’s weakness, said Mr Arkhom, who called for better cost efficiency and use of local materials to prepare for when the currency eventually appreciates.

Current flooding to have little effect on GDP, the finance minister said, adding that this year’s affected area would be equivalent to only a third of what was impacted during the 2011 inundation.