Baht up on Friday’s opening but fluctuation predicted
FRIDAY, SEPTEMBER 30, 2022
THE NATION
The baht opened at 37.93 to the US dollar on Friday, strengthening from Thursday’s close of 38.06.
The currency is expected to move between 37.85 and 38.15 during the day, Krungthai Bank market strategist Poon Panichpibool predicted.
Poon said the baht could weaken as the currency market is in a risk-off state. However, any weakening would be limited if the gold price continues to rise.
Moreover, the rapid strengthening of the yuan would likely support the baht.
Poon estimated the baht’s current resistance level at 38.20-38.30 to the dollar.
He pinpointed the Thai currency’s support level at 37.80-37.90.
The market strategist also advised investors to use hedging tools such as options to manage risks in a highly volatile currency market.
BOT tells Thai commercial banks to push interest rates up gradually
THURSDAY, SEPTEMBER 29, 2022
The Thai central bank has asked commercial banks not to rush in pushing up interest rates after it raised the policy interest rate by 0.25 percentage point on Wednesday.
Bank of Thailand (BOT) Governor Sethaput Suthiwartnarueput said on Thursday that it was common for commercial banks to follow suit, but that the central bank wanted to see gradual increases in interest rates to reflect the current situation.
“There is no set target on how much the interest rate should be, or how many increases there should be. That rather depends on the timing and context suitable for Thailand,” Sethaput said.
He said that interest rate increases are based on factors such as core inflation, adding that the country’s monetary policy could be revised in the future if that was necessary.
Thailand’s inflation rate recently rose to 10 per cent.
The BOT’s Monetary Policy Committee on Wednesday resolved to increase the policy interest rate from 0.75 per cent to 1 per cent, with immediate effect. Shortly afterwards, some commercial banks adjusted upward their interest rates for deposits and loans.
Sethaput said on Thursday that the Thai economy is recovering continuously this year due to the upturn in domestic demand, consumption and tourist arrivals, although a global economic recession may have an adverse impact on exports.
The BOT predicted a growth of 3.3 per cent for the Thai economy this year and 3.8 per cent next year, as inflation is expected to decline to “manageable levels” next year.
MPC’s goal is to maintain economic, pricing stability: secretary
THURSDAY, SEPTEMBER 29, 2022
THE NATION
The Monetary Policy Committee’s (MPC) ultimate goal in implementing financial policies is not to stabilise the value of the baht but to maintain stability of the economy, pricing and the financial system, MPC secretary Piti Disyatat said on Wednesday.
Piti’s comment came after the MPC on Wednesday raised the policy interest rate by 25 basis points to 1.00 per cent per annum in a bid to tame the impact of inflation on economic growth.
The latest hike by a 0.25 percentage point followed a similar increase last month.
Piti said the committee voted to raise the policy rate because the economy was still recovering, driven by tourism and private sector spending, while inflation remained high.
The MPC has been evaluating the baht’s trend and believed its current value (at 37.93 baht to the US dollar in opening trade on Thursday morning) would not impact Thailand’s overall economy and inflation due to three main reasons:
First is the fact that the weakening of the baht has been caused primarily by a strengthening US dollar due to a series of Federal Reserve rate hikes.
Secondly, Thailand has no problem regarding fund outflows as investors still view the country as having high potential thanks to its substantial foreign reserves – placing the kingdom sixth highest in the world – while the country’s reserves are three times bigger than its foreign debts.
“Lastly, the weakening of the baht has been beneficial to exporters. As for importers who face higher costs, they usually mitigate the impact by planning ahead and using financial tools,” Piti said.
He insisted the MPC is monitoring the baht value closely and will employ “suitable financial measures if necessary to achieve its goal” to maintain the stability of the economy, pricing and financial system.
“The MPC will not use any drastic measure just for the sole purpose of stabilising the baht,” he promised.
The committee has raised its estimate of this year’s headline inflation from 6.2 to 6.3 per cent and next year’s from 2.5 to 2.6 per cent. It also reduced its GDP growth estimate next year from 4.2 to 3.8 per cent, while 2022 GDP was forecast at 3.3 per cent.
The MPC, however, expected the tourism industry to flourish this year and raised its estimate of foreign arrivals from 6 million to 9.5 million visitors in 2022, and from 19 million to 21 million in 2023.
Rung Sa-Nguanreuang, senior director of Global Markets Business Promotion at Bank of Ayudhya, said the bank expects the MPC to raise the policy rate again by 0.25 percentage point in its next meeting on November 30, and twice within the first quarter of 2023, with the rate staying at 1.75 per cent early next year.
The tourism industry alone might not be adequate to keep the baht afloat, she said, estimating that the Thai currency could start becoming stronger as late as the first quarter of 2023.
Weakening of baht might slow down with market in risk-on state: strategist
THURSDAY, SEPTEMBER 29, 2022
THE NATION
The baht opened at 37.93 to the US dollar on Thursday, strengthening from Wednesday’s close of 38.30.
The currency is expected to move between 37.85 and 38.15 during the day, Krungthai Bank market strategist Poon Panichpibool predicted.
He said the baht’s weakening might slow down as the market is in a risk-on state and this could put pressure on the dollar, leading to a weakening of the US currency.
Poon suggested monitoring foreign transaction flows as investors might return to purchase Thai stocks and long-term bonds after bond yields increased significantly while those in other countries decreased.
Moreover, Poon said, if the gold price increases, it might slow the weakening of the baht. The currency’s resistance level is now 38.20 to the dollar.
However, the baht is still under pressure after the central bank’s Monetary Policy Committee (MPC) said it would increase the interest rate gradually. The market, however, expected the MPC to increase the rate quickly.
The market might be in a risk-on state for a short period, he said. It will be a bear market rally until the US 10-year bond yield turns over as the US Federal Reserve signals it may not increase the interest rate rapidly, believing the global economy is not all bad.
In Thailand, most importers are waiting for the baht’s value to head down before purchasing the dollar, Poon said, adding that the support level for the Thai currency is between 37.80 and 37.90.
He advised investors to use hedging tools such as options to manage risks in a highly volatile currency market.
KResearch maintains Thailand GDP growth projection for 2022 at 2.9%
WEDNESDAY, SEPTEMBER 28, 2022
And Kasikorn Research Center projected a range of 3.2-4.2 per cent for 2023; hopes pinned on tourism to mitigate impacts of economic recession among Thailand’s partners
Amid rising concerns about the economic recession in many countries – the US in particular – the Thai economy has only just emerged from the doldrums.
Nattaporn Triratanasirikul, Deputy Managing Director, Kasikorn Research Center Co., Ltd. (KResearch), holds the view that the US economy is set to plunge into a technical recession once more from the end of 2022 to early 2023. Likewise, the European economy may see a quarter-on-quarter contraction for two successive quarters.
Under these circumstances, the Thai economic recovery will thus receive less support from exports. Worse, inflation is expected to remain persistently high worldwide due to protracted international political disputes.
Therefore, the Thai economy will be primarily driven by an improved tourism sector during the remainder of 2022 and into 2023.
Tourist arrivals for this year are projected at 9.75 million, an increase from the previous projection of 7.2 million.
For 2023, the number of international tourists is expected to rise to 13.0-20.0 million, which would remain substantially less than the pre-Covid level of 40 million.
Overall, KResearch maintains its GDP projection for 2022 at 2.9 per cent. Even though GDP growth for 2023 may accelerate to 3.2-4.2 per cent, close attention should be paid to multiple risks, namely runaway inflation, rising interest rate trends and economic slowdowns among Thailand’s trading partners.
Regarding the interest rate outlook, it is expected that the US Federal Reserve (Fed) will press ahead with its policy rate hikes at the two meetings during the remainder of 2022. Further rate increases may also be seen early next year depending on the rate of inflation and the planned extent of each Fed Funds rate hike.
Meanwhile, Thailand’s Monetary Policy Committee (MPC) may continue to increase its policy rate at least until the first quarter of 2023, albeit at a relatively meager pace. As for the Baht outlook during the remainder of 2022, it will likely remain weak as long as the US dollar is supported by the Fed’s policy rate hikes.
Thanyalak Vacharachaisurapol, KResearch Deputy Managing Director, is of the view that signals regarding policy rate hikes given by Thailand’s Monetary Policy Committee and the policy that aims to raise contributions to the Financial Institutions Development Fund (FIDF) to the previous level of 0.46 per cent, taking effect at the beginning of 2023, may prompt commercial banks to gradually raise their fixed deposit rates and standard loan rates although liquidity remains at elevated levels.
Higher interest rates may not trigger a potential NPL cliff as commercial banks have hastened their debt restructuring and undertaken proactive debt management, but close attention must be paid to issues related to their asset quality and customer assistance measures.
KResearch expects that the NPL to total loan ratio in the Thai commercial banking system will be within a range of 2.90-3.10 per cent by the end of 2023, against the 2.88 per cent recorded at the end of the second quarter of 2022. Loans within the Thai commercial banking system are expected to grow within a range of 4.5-6.0 per cent in 2023, versus the 5.0-per cent growth projected for 2022, or relatively moderate growth amid increased economic uncertainty.
Regarding the industrial sector for the remainder of this year and in 2023, Kevalin Wangpichayasuk, KResearch Deputy Managing Director, is of the view that most industries still face multiple challenges, particularly slowdowns in core economies that are among Thailand’s major trade partners. As a result, export-intensive industries may not fully benefit from the Baht’s depreciation.
The tourism sector faces a similar dilemma, as major tourist markets have to deal with their weakening currencies, while some countries are at risk of economic recession. Additionally, prices of airline tickets and other travel expenses are higher due to soaring energy prices. These factors have an impact on foreign tourists’ decisions regarding travel and spending.
Meanwhile, the Baht’s depreciation by 10-15 per cent will raise import costs by around 2.2 per cent on average. Consequently, the industrial sector must be prepared to tackle these challenges which could undermine its path toward recovery next year.
EXIM Thailand promotes Thai businesses in linkage with Next Normal global markets
THURSDAY, SEPTEMBER 22, 2022
In response to the Ministry of Finance’s Policy, The Bank regards Vietnam as a key business counterpart gearing up as a major manufacturing base of the future.
Arkhom Termpittayapaisith, Minister of Finance of Thailand, presided over the opening ceremony of a seminar titled “Vietnam in Focus 2022: The Dream Journey” in the presence of Nikorndej Balankura, Ambassador, Royal Thai Embassy in Hanoi, the Socialist Republic of Vietnam, and welcomed by Rak Vorrakitpokatorn, President of Export-Import Bank of Thailand (EXIM Thailand), at The St. Regis Bangkok Hotel on September 22, 2022.
Minister said that global economic recovery in the post-COVID-19 Next Normal era has come with plenty of fresh business opportunities particularly in such a new frontier as Vietnam where there is high economic potential with a population of almost 100 million and an annual economic growth prospect of around 7%.
Vietnam is Thailand’s 4th largest export market, following the US, China and Japan, and its 10th largest source of import.
Thai-Vietnamese trade has recorded a frog-leap growth of almost 20% per year from 150 million US dollars in 1992 to around 20,000 million US dollars at present.
Besides, the Vietnamese government has vigorously implemented a policy on the promotion of free trade and foreign direct investment, making it a promising investment destination for foreign investors including Thai investors who rank no. 8 among top investors in Vietnam.
Thus, Thai entrepreneurs should actively expand their collaboration with Vietnamese ones whether in international trade or joint investment.
Arkhom further said that the Thai government is well positioned to promote cooperation between public and private sectors in international trade and investment as well as fiscal and financial dimensions through EXIM Thailand’s support.
EXIM Thailand seeks to perform its duties proactively toward its role as Thailand Development Bank leveraging its expertise, financial tools and alliance networks to promote Thai entrepreneurs’ access to new opportunities in global markets, transcending obstacles, and dealing with risks and challenges in international trade and investment, along with driving the development of industries of the future in the Bio-Circular-Green (BCG) economy in linkage with sustainable development regionally under the Asean and Apec’s cooperation frameworks.
EXIM Thailand President pointed out that crucial factors to Thai entrepreneurs’ competitiveness in Next Normal global markets are their resilience and adaptability.
The Bank is fully equipped to perform its duties beyond banking to assist Thai entrepreneurs of all levels from start-ups to existing entrepreneurs in continuing their businesses amid economic, social and environmental uncertainties and challenges.
A complete range of financial tools is made available in conjunction with the knowledge base and alliance networks to facilitate Thai entrepreneurs’ start-up or expansion of international trade and investment with confidence in both existing and new frontier markets. In particular, Vietnam which was formerly Thailand’s “competitor” has today become its “key business counterpart” on which Thailand has increasingly relied.
Vietnam has been Thailand’s 5th largest business counterpart since 2017, moving up from the 15th in 2012, while ranking the 4th largest investment destination of Thai investors at present, moving up from the 10th rank 10 years ago.
Rak clarified that EXIM Thailand has armed Thai entrepreneurs with the capability to comprehensively adapt to changes in and deal with risks of international business operation coupled with risk hedging tools, e.g. foreign exchange forward contract or foreign exchange option, or trade and political risk hedge tools in case of buyer’s bankruptcy, rejection of goods delivered or non-payment, or buyer country’s governmental control on money transfer, ban on import of goods, or eruption of war or riot.
EXIM Thailand will help them pay compensation and make debt collection aiming to relieve Thai entrepreneurs’ concerns about the said risks.
The Bank will also be committed to dedicating its time and resources to product and service development to fill up Vietnam’s production supply chain gaps, particularly in the industries in which Thailand has potential and for which there is high demand, such as automobile, electronics, clean energy and foods of the future.
EXIM Thailand has strived to support Thai entrepreneurs’ entry into the supply chains of Vietnam’s BCG businesses as Thai entrepreneurs’ capabilities are responsive to the Vietnamese government policy to promote renewable energy investment to cope with the surging demand for electricity in line with the country’s industrial sector development and urbanization.
EXIM Thailand has currently supported investment in Vietnam in the amount of over 17,300 million baht covering several businesses, among which are clean energy power plant business, petrochemicals, wholesaling and retailing.
Besides, to support business sectors’ reduction of greenhouse gas emissions and compliance with environmental standards in pace with green economy trends toward sustainable development, the Bank has rolled out products like EXIM Kill Bill by Biz Transformation, offering a credit line of up to 100 million baht, the lowest interest rate of 2.00% per annum and a maximum loan tenor of 7 years; and Solar Orchestra for businesses of all sizes which aspire to invest in the installation of solar rooftop systems with a maximum credit line of 100% of the project cost, the lowest interest rate of 2.75% per annum and a loan tenor of up to 7 years, together with entitlement to the registration of full-fledged carbon credit and a 3-year tax exemption privilege of 50% of the project cost from the Board of Investment (BOI).
In view of operational performance, as of the end of August 2022, EXIM Thailand recorded total outstanding loans of 67,458 million baht for international projects, a 4,271 million baht or 6.8% growth year-on-year. Classified by the principal market, the Bank has consistently supported Thai entrepreneurs in spreading their wings to cover the CLMV (Cambodia, Lao PDR, Myanmar and Vietnam) and new frontiers.
In the first 8 months of 2022, total outstanding loans to the CLMV and new frontiers amounted to 53,815 million baht, a year-on-year growth of 7,804 million baht or 17%. Of this total outstanding loan amount, 14,960 million baht was recorded in Vietnam, constituting a 55.4% year-on-year growth.
“There are ample opportunities for Thai entrepreneurs in new frontiers, particularly Vietnam which is in alliance with various countries in political and economic dimensions and is among the top countries having inked free trade agreements (FTAs), covering more than 50 countries around the world.
Meanwhile, Thailand has a high potential to fill up the gaps in the supply chains of Vietnam and those globally. EXIM Thailand is fully ready to work collaboratively with the public and private sectors in supporting Thai entrepreneurs in their business start-ups or expansion in global markets with confidence. They may start from Vietnam and advance to markets elsewhere in the enhancement of sustainable development of the region and the world at large,” added Rak.
EXIM BANK Corporate Branding and Communication Department
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