Strong baht hurting tourist arrivals

[reader]

From Bloomberg Financial

World-Beating Currency Is a Big, Big Headache for Thailand's Tourism

Thailand’s tourism minister has blamed a surge in the baht for sapping tourist arrivals into Southeast Asia’s second-largest economy and says he’ll take up the matter with the central bank, highlighting rising concern over the currency’s gains.

Arrivals have dropped because of the baht’s strength, Piphat Ratchakitprakarn, minister of tourism and sports, told reporters in Bangkok after he officially began his new role. Piphat said he’ll discuss with the Bank of Thailand and the finance minister what can be done to help support the industry.

Thailand’s currency is among the strongest in emerging markets over the past 12 months, and the jump has been a headwind for an economy that’s also being hurt by the fall-out from global trade tensions. The central bank has signaled its concern about the advance, and on Wednesday Governor Veerathai Santiprabhob said he’s tracking the currency closely and is prepared to act.

“The Thai baht’s strength is part of the reason why the number of tourists has dropped as those who come would get less money from their currencies to spend,” Piphat said on Thursday. “Tourism is considered to be one of our country’s main revenue drivers. I will do everything I can to make sure that arrivals increase and more revenue is generated than before.”

Piphat’s aim to boost the number of arrivals contrasts with the view from his predecessor, Weerasak Kowsurat, who said Thailand should care less about increasing of quantity of travelers and focus instead on improving sustainable tourism to mitigate environmental impacts caused by too many visitors.

Tourism is a key component of the economy, accounting for about a fifth of gross domestic product by some measures. Piphat said he was sticking to a recently-lowered target of 39.9 million arrivals but declined to comment on whether Thailand could hit its goal for 3.2 trillion baht in receipts this year. Arrivals in June fell to 2.9 million from 3.03 million a year earlier.

https://www.bloomberg.com/news/articles/2019-07-18/world-beating-baht-is-a-big-big-headache-for-thailand-s-tourism

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From Bangkok Post

IMF urges Thailand to adopt fiscal reforms, monetary easing to support growth

Thailand should adopt an expansionary policy mix, including fiscal reforms and monetary easing to help support growth, which has slowed amid rising global trade tensions, the International Monetary Fund said on Monday.

The Thai economy grew by 4.1% in 2018, but growth in 2019–20 is expected to slow as uncertainty over trade tensions weigh on global demand, the IMF said in a statement after a staff visit to Southeast Asia's second-largest economy.

Risks to the outlook are tilted to the downside, most notably the escalation of protectionism threatening the global trade system, the IMF said.

"To support domestic demand, the team recommends an expansionary policy mix consisting of judicious use of fiscal space, fiscal reforms, and monetary easing consistent with a data-dependent approach," it said.

"Given the delay in the enactment of the FY 2020 budget with the transition to the new government and the resulting lack of fiscal stimulus in the remaining months of 2019, as well as the moderation of the financial cycle, monetary easing would help support domestic demand and external rebalancing," it said.

The Bank of Thailand has left its policy interest rate unchanged at 1.75% since tightening in December. It will next review policy on Aug 7.

https://www.bangkokpost.com/business/1717271/imf-urges-thailand-to-adopt-fiscal-reforms-monetary-easing-to-support-growth

[vinapu]

for us as far as I can see there is  solution to this, bring more money, shorten your vacation or watch your spending carefully or any combination of those. No reason to abandon Kingdom in it's hour of need

[PeterRS]

11 hours ago, vinapu said:

No reason to abandon Kingdom in it's hour of need

Hour of need? Surely that's a bit much! If I read the chart correctly, the numbers may be down on estimates for this year but they are still expecting the same number as last year. The trade war initiated by Trump has been responsible for much of the downturn in the currencies of those countries recently contributing the most visitors especially Asian visitors. The Chinese RMB is way down, the Malaysian Ringgit is way down, the € is down, the £ is way down and falling (Brexit fears). I doubt if a few percent depreciation of the baht will make much difference.

[reader]

Factors behind the strong baht are varied and extend beyond Trump's policies. The real power broker is the Central Bank (Thai's federal reserve).  The wealthy and influential Thais who control the banking industry have an interest in a strong baht. Pitted against them are the Thais who control the export-driven industries who seek monetary easing and lower interest rates. The bankers have had the upper hand until now but that may be about to change.

Actually, as little as quarter to a half-percent shift in the current interest-sensitive environment could change direction. The monetarists favor something in the range of 33 baht to the dollar.

You're right, Peter, about the overall direction of tourist arrivals. A glance at the chart shows higher "highs" and higher "lows". Just as in stock prices, this is a positive indicator of future growth.

[reader]

From Nationmultimedia

BOT makes surprise interest rate cut

The Bank of Thailand’s Monetary Policy Committee (MPC) on Wednesday (August 7) made a surprise decision to cut the policy interest rate amid an economic slowdown and the heightened trade war between the US and China.

The MPC cut the interest rate by 25 basis points to 1.5 per cent.

Of the seven-member committee, five voted for the cut while two voted to maintain the rate at 1.75 per cent.

The baht has been one of the strongest currencies in the region while the Chinese yuan has been weakeningThe baht and Thai government bonds are considered by foreign investors as safe-haven. The baht ranks 18th among the strongest currencies.

The Thai currency has appreciated against the US dollar by about 5 per cent since early this year while it has gained 8 per cent against the yuan.

Exporters and even overseas Thai workers have recently expressed worries about the stronger baht.

Economists had expected the MPC to maintain the policy rate at today’s meeting.

Kobsidthi Silpachai, the head of capital markets research at Kasikornbank, said the central bank aims to prevent further appreciation of the baht and shore up the economy.

After the news of a rate cut, the baht immediately weakened to Bt30.89 per dollar from 30.75 before the rate cut, then it rebounded to Bt30.82 at around 3pm.

“It may not help much if other central banks follow suit and it could lead to competitive easing, comparable with the competitive devaluation during the 1997 financial crisis,” Kobsidthi said.

New Zealand’s central bank cut its rate to 1 per cent from 1.5 per cent on Wednesday morning while India’s central bank also cut its rate by 35 basis points from 5.75 per cent to 5.40 per cent.

https://www.nationthailand.com/business/30374413

 

 

 

[ggobkk]

Chinese tourism may decline as the Yuan (RMB) has been devalued - this may result in available seats at Dreamboys.

I suspect forum members will become well versed in currency fluctuations in the very near future as national economies start playing around/manipulating their currencies.  

I'll be in Thailand at the end of August and then again at the end of November - the USD$ remains strong, so I shouldn't have to adjust too much (I hope).

 

[vinapu]

8 hours ago, ggobkk said:

 

I'll be in Thailand at the end of August and then again at the end of November - the USD$ remains strong, so I shouldn't have to adjust too much (I hope).

 

following old advice ' bring half stuff and twice as much money ' always helps

[reader]

From The Bangkok Post

Visa exemption called for as tourism drags

AirAsia chief says industry needs more stimulus, and region's airports need more capacity

The government is being urged to make big tourism markets, notably China and India, visa-exempt as part of attempts to revive sluggish tourism.

Tassapon Bijleveld, chief executive of Asia Aviation Plc (AAV), the major shareholder of Thai AirAsia, said the government must offer new incentives to lure foreign visitors amid the slowdown in the tourism sector.

Foreign arrivals grew by 1.5% to 19.76 million in the first half of the year. Visitors from China, the biggest tourism market for Thailand, were down 4.7% at 5.65 million.

The government should immediately consider extending the waiver of visa-on-arrival (VOA) fees for 21 countries, including China and India, Mr Tassapon said.

The VOA scheme was put in place last year and renewed twice, providing a 2,000-baht waiver for tourists from 21 countries until the end of October.

"The weakened yuan and strong baht are factors directly affecting Chinese visitors, as the volatile currency adds 20% in costs to Chinese visitors," Mr Tassapon said.

Meanwhile, AirAsia group chief executive Tony Fernandes said the VOA waiver has improved the tourism situation in Thailand.

Speaking on a visit to Bangkok on Friday, Mr Fernandes said that despite the group’s relentless efforts to expand to new destinations, what is holding Southeast Asia back overall is low airport capacity.

https://www.bangkokpost.com/business/1727603/visa-exemption-called-for-as-tourism-drags#cxrecs_s

 

[Travellerdave]

On 8/8/2019 at 4:29 AM, vinapu said:

following old advice ' bring half stuff and twice as much money ' always helps

That’s so true Vinapu. But what about expats who have made their home in Thailand and have burnt their boats with their home country ?, They did their money sums before making the move, with pension income and probably with a lump sum from the the sale of a house, using an exchange rates that applied say from 2005 to 2015 ( in the case of the U.K. pound that would be between 70 to 50 Thai Baht)

Now they are looking at 37 baht to a pound, a much larger depreciation than is the case with the USD OR EUR. perhaps they have a pension of say £1000 per month which produced in the past 60,000 baht - enough for a pleasant life particularly away from the resorts or BKK. Now it’s only 37,000 which means survival not living and the worry about medical expenses. If possible they should return to the UK, but perhaps connections with family and friends have been lost and the cost of finding somewhere to live has substantially increased.

During my recent visits to Pattaya I have met several in the gay community who are in that position. Not for them the enjoyment of of sleeping with attractive money boys or racking up bar bills boosted by boy drinks. OK I can reminisce and complain about the exchange rate compared with when I first discovered Thailand (70 baht - £1) and a night in the gogos plus a boy in my bed was a trifling cost, but that’s nothing to the pain of many expats who are now struggling.

[reader]

Thailand's success in establishing its currency as the among safest in Southeast Asia owes a lot to its hefty foreign reserves of US dollars. Not only does it have more than its SE neighbors sans Singapore, it's also punching above its weight class compared to most EURO nations where it has more than the UK, Germany and France combined.

https://www.visualcapitalist.com/countries-most-foreign-currency-reserves/

NOTE: The following figures are from 2018. Thailand has boosted its reserves by USD $10B since.

 

[vinapu]

11 hours ago, Travellerdave said:

That’s so true Vinapu. But what about expats who have made their home in Thailand and have burnt their boats with their home country ?, 

My advice was to travellers only.  But it wouldn't  hurt if people contemplating move  to another country permanently  considered it as well and thought  'what will happen if my currency goes down by half and at the same time prices in my new country will go up twice".  

I understand your point about expats but those you describe  are victims of lack of foresight , poor planning and bad luck. In most cases they have nobody to blame , even themselves, it's just circumstances did not work  to their original specifications. Changing countries and environment always carries both risks and rewards and one who decides to move must expect first but at the same time hope for the second.

Burning boats is good for a movies but very rarely  works in real life. We tend to forget that with age our health is expected to deteriorate and day may come when we need somebody to make us tea and buy us bread, then that boat may come handy.

So many now are paying price for having  those boys in their bed for trifling cost as you said. Nobody was complaining before that having guy long time costs less than train ticket to the airport at home. Most of us are coming to Thailand for illusions, it turns out that some of those illusions are not what we hoped for.

[reader]

Excerpted from Bloomberg Financial

The Thai baht was the lone developing-nation currency that managed to stay in the green against the dollar in August, reflecting its insulation from China and its trade drama, according to Wells Fargo’s McKenna.

Complete article can be viewed at

https://www.bloomberg.com/news/articles/2019-08-30/emerging-markets-are-often-bad-in-august-but-rarely-this-bad