Published on : Thursday, April 1, 2021
A perfect storm is overwhelming Thailand’s baht and the one group of people who can save it is caught in lockdown, thousands of kilometers from the arrivals lounges of Bangkok, Phuket and Chiang Mai.
A current-account deficit, resurgent dollar and the seasonal repatriation of dividends by Japanese investors have all made the baht the worst-performing currency for Asia’s emerging markets for March. But it’s the dreary outlook for tourism that’s the fundamental weakness, sending the dollar-baht to nearly a six-month high and ever closer to a test of its four-year downtrend.
“The real stimulant for the economy would be the return of international tourists and it’s something that will largely be missing in action this year,” said Prakash Sakpal, a senior economist at ING Groep NV in Singapore.
“I would be surprised if the Thai baht sees the previous support it enjoyed from external surpluses anytime soon,” Sakpal said. The more than year-long pandemic has corroded an important attraction for the baht, i.e. the Thai current-account surplus, which has turned to a deficit for four straight months after six profitable years.
Tourism receipts contributed more than 62% of the surplus in 2019, according to ING. With Europe, which is the second-biggest source of tourists to Thailand struggling with the second wave of infections, visitor numbers are not likely to return soon.