Call for action as baht sparks panic

Serious efforts to address baht appreciation are needed as it is threatening to dampen the country’s key economic engines of exports and tourism, while businesses struggle with an unsettled domestic economy, says the Federation of Thai Industries (FTI).
Baht volatility, following a surge to a 19-month high against the US dollar, is becoming a big concern among businesses, said Kriengkrai Thiennukul, the FTI chairman.
The baht opened on Sept 23 at 32.92 per dollar, compared with 33.60 baht at closing on Sept 20. Yesterday the baht was quoted at 32.68 on average, according to the Bank of Thailand. The currency was trading close to 37 to the dollar in late June but has appreciated steadily since then.
This is not good for manufacturers competing with neighbouringnations in the global market, said Mr Kriengkrai.
Thai entrepreneurs face higher financial costs because of elevated lending rates in the country, he said. They cannot take full advantage of free trade agreements (FTAs), while nations such as Vietnam have more FTAs signed, said Mr Kriengkrai.
Businesses also shoulder high energy costs, he said.
“Agricultural product and food exporters are affected by the stronger baht as they earn less profit,” he said.
“Many manufacturers in these sectors cannot develop innovative products to boost sales, so the current profit margin is low.”
Mr Kriengkrai attributed the latest baht appreciation to the US Federal Reserve’s decision to cut interest rates by 50 basis points.
The Thai Industries Sentiment Index fell to 87.7 points in August amid a stagnant economy, a strengthening baht and the impact of severe flooding in the North, according to the FTI.
Manufacturers were worried about exports in August as the baht rose from 36.46 to the dollar in July to 34.92 last month.
Pricier exports as a result of a stronger baht are fuelling concerns among entrepreneurs over the impact of thehigh levels of household debt and the state policy to raise the daily minimum wage to 400 baht, which will deal a further blow to labour-intensive businesses.
The FTI called on the government to launch new measures to better help manufacturers, especially small and medium-sized enterprises (SMEs), get through the economic hardship.
“Exporters and SMEs cannot compete with rivals in neighbouring countries while foreign tourists may not be happy when they have to pay more to buy products and services in Thailand,” said Mr Kriengkrai.
A source from a large inbound tour operator, who asked not to be named, said the earlier baht appreciation over other Asian currencies was worrying operators.
Tourists may see Thailand as a less desirable destination and opt for other countries such as Japan, the source said.