Thai baht banknotes and coins.
Artur Widak l NurPhoto via Getty Images
The Thai baht, once the top performing currency in Asia before the pandemic, fell steadily in 2021 and is this year’s hardest-hit currency in the region, according to Mizuho Bank.
The Japanese bank referred in a statement on Friday to “uncharacteristic underperformance of the Thai baht, which makes it the worst performer yet in 2021”.
According to data from Refinitiv Eikon, the Thai baht has fallen by more than 10% against the US dollar since the beginning of the year.
According to Refinitiv, Thailand’s currency is doing the weakest against other major Asia-Pacific currencies this year. Against the greenback, the Japanese yen is almost 7% lower, the Malaysian ringgit is down 5%, while the Australian dollar is down 4.43% since the start of the year.
“The THB, a clear and significant laggard, does not match Thailand’s solid (albeit diminished) current account surplus or relatively low inflation,” wrote Vishnu Varathan, director of economics and strategy for the bank.
In 2019, before the Covid pandemic broke out, there were concerns about the stronger Thai baht being carried by its large trade surplus. A stronger currency makes the country’s exports more expensive and makes them less attractive in international markets.
Fall in tourism hits Thailand
Still, the underperformance of the Asian currency this year cannot be attributed to the Covid pandemic alone, considering that the impact of the Delta variant on the rest of the region is “far grimmer,” Varathan said.
Varathan pointed out that the sharp drop in tourism numbers has multiplied the “Covid devastation” of the Thai economy.
They want to fully open again by October. I think that’s probably too ambitious, probably won’t happen.
Euben Paracuelles
Chief Economist of ASEAN, Nomura
According to the Ministry of Tourism and the World Bank, Thailand recorded just over 34,000 tourist arrivals as of May this year, compared to over 39 million in 2019.
The Southeast Asian nation relies heavily on tourism dollars for economic growth. Tourism spending represented around 11% of Thailand’s GDP in 2019, before the pandemic.
Fewer tourists also mean less demand for the Thai baht.
“The sheer power of this ‘tourism multiplier’ means it remains the main driver of human trafficking,” said Varathan.
“Further ‘variant risks’ and associated ongoing delays in resuming tourism / travel will continue to pose a clear and current threat to human trafficking,” he said, referring to new variants of Covid.
“Very difficult” to reopen to tourists
Thailand’s over-reliance on tourism will be “very challenging” for the country as it tries to reopen to tourists while fighting the pandemic, Euben Paracuelles, ASEAN’s chief economist at Nomura, said Thursday.
The country’s attempts to reopen its tourism destinations have not gone well, he told CNBC.
In July, Thailand started a so-called “sandbox” pilot project in Phuket, in which tourists can visit the holiday destination without quarantine. But just a week after it reopened, one case was recorded – a tourist from the United Arab Emirates. At the end of the first week, there were 27 new cases, according to the Associated Press.
“To be able to open up, I think it’s going to be a very big fight and they have very ambitious goals. They want to fully reopen by October. I think that’s probably too ambitious, probably won’t happen, ”Paracuelles said. “And because of Thailand’s over-reliance on tourism, I think that’s where most of the drive and recovery will come from.”
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