With the US dollar strengthening and Thailand’s struggling economy, economic experts predict the baht may fall to 38 to the dollar by the end of this year. The head of capital markets research for Kasikorn Bank believes the baht will continue its instability along with the global money markets as a result of domestic and international factors.

While the US dollar continues to grow in value against foreign currencies due to the hawkish continued federal fund rate hikes, the Bank of Thailand’s Monetary Policy Committee (MPC) is likely to boost its benchmark policy rate from 0.75% to 1% in a meeting scheduled for next week. That would pump a little power into the baht and keep it closer to 37 baht to the dollar, but it’s only a temporary fix with the baht expected to drop in value after.

The news for the Thai currency isn’t all bad though, as K Bank predicts that, as tourism brings in more revenue toward the end of the year, the baht may climb back to 35 against the dollar. And November’s meeting of the MPC is predicted to raise the policy rate again to 1.25% further propping up the baht.

Amonthep Chawla, the head of the research economist office at CIMB Thai Bank, agrees with the analysis, expecting the baht to fall to 38 to one to the US dollar, but predicts an even higher policy rate increase for the bank of Thailand to 1.75%. In fact, he believes it will reach 2.5% by the end of 2023.

“We expect the central bank will raise its policy rate two times, each by 50 basis points, this year to contain the spread between Thailand’s rate and the fed funds rate. The move should help slow the baht depreciation,”

The CIMBT official says that the rising policy rate is due to the parallel rising inflation, a problem felt around the world. In Thailand, the inflation rate is estimated to be a 6.2% average by the end of 2022, though it is expected to fall to just 2.6% in 2023.

Like many in the government and private sector in Thailand, CIMBT is also looking toward a strong recovery for the tourism industry to save and revive Thailand’s economy. As tourists return to the kingdom in higher numbers, inflation should ease as the economy stabilises and the gross domestic product increases, with CIMBT recently raising its prediction from 3.1% to 3.2% for GDP growth by the end of the year.

 

(Source: – The Thaiger)