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Thursday, November 30, 2023

Thai Prime Minister Addresses Weak Baht and Economic Implications

In a recent statement during his visit to the United States, Prime Minister Srettha Thavisin of Thailand addressed concerns surrounding the weakening baht and its potential impact on the nation’s economy. Prime Minister Thavisin emphasized that the Bank of Thailand (BOT) is closely monitoring the situation and assured the public that the government is not interfering in the central bank’s responsibilities.

The Thai baht has experienced a notable depreciation in recent months, hitting multi-month lows, with its exchange rate against the US dollar reaching 36.16, following a low of 36.32 on September 20th. Year-to-date, the baht has seen a 4.4% decline against the greenback. Prime Minister Thavisin acknowledged that this depreciation has been primarily driven by capital outflows resulting from interest rate differentials.

The decision by the U.S. Federal Reserve to maintain stable interest rates, coupled with its assertive stance on monetary policy, has strengthened the value of the US dollar. This development has contributed to the downward pressure on the baht, affecting its exchange rate.

Despite concerns regarding the weakening currency, Prime Minister Thavisin highlighted potential silver linings in this situation. He suggested that a weaker baht could benefit key sectors of the Thai economy, such as exports and tourism. A devalued currency can make Thai exports more competitive in international markets, potentially boosting demand for the nation’s goods and services.

Furthermore, the Prime Minister stated that the government’s role is not to interfere with the central bank’s responsibilities but to support its efforts in maintaining economic stability. He also mentioned that the new government, which recently assumed office, is planning increased government spending to stimulate the economy. This move aims to counteract the challenges posed by sluggish export demand and low investor confidence. When questioned about the potential impact of a large public borrowing plan on private sector fundraising, Prime Minister Thavisin reassured that market liquidity remains sufficient, suggesting that there should be no significant disruptions in private sector financing.

As the Bank of Thailand continues to monitor the baht’s performance and the global economic landscape evolves, stakeholders will be closely watching how these developments impact Thailand’s economic prospects in the coming months.

Author: phacharaphonk

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