Thai Baht Performance During The Pandemic

Thai Baht (“THB”) has been seen as the best performing currency since 2018.  According to the Bank of Thailand, the Thai Baht reached a six-year high by climbing 8.53% against the U.S. dollar by 1 USD = 29.835THB.  Comparing with the performance of New Taiwan Currency and Japanese Yen, the Thai Baht had the largest percentage of increase.  However, Thai Baht faced a sharp decline starting from 2021 especially from June 2021.  How did Thai Baht perform during the pandemic?  What is the possible reason behind the trend?  How will the trend of Thai Baht influence Thailand property investors’ decisions?

Performance of Thai Baht during the Pandemic

Before the pandemic, the Thai Baht was the strongest-performing currency in Asia. Starting from mid-2020, the Thai Baht stabilized from the currency fluctuation at the beginning of the pandemic and even reach 1 USD = 29.7961THB in December of 2020. However, the Thai Baht started its sharp depreciation from June 2021 and reach the lowest by 1USD = 33.4686THB in August 2021. It has plunged more than 10 % against the USD year-to-date to a 15-month low.

(Source: Xe US Dollar to Thai Baht Exchange Rate Chart Aug 28, 2021)

Comparing with other major Asia Pacific currencies, the Thai Baht is facing the largest hit this year. Against the USD, the Japanese Yen and Malaysian Ringgit declined by 7% and 5% respectively.

Possible Reason Behind

Confirmed new cases per day

Confirmed death per day

From Bangkok Post, the Fitch report pointed out that Thailand is facing the worst epidemic since the COVID-19 pandemic due to the highly transmissible Delta variant. In a single day, there are more than 14,000 new confirmed cases and more than 100 fatalities. In order to alleviate the rapidly rising epidemic, the Thai government implemented strict closure of the country. It brings a side effect of suppressing tourism.

According to the Ministry of Tourism and Sports, Thailand had over 39 million tourists before the pandemic (2019). Due to the travel restrictions, Thailand had only 34,000 tourist arrivals as of May this year. As a country relies heavily on tourism in which tourist spending accounted for about 11 % of Thai GDP in 2019, the ‘Covid devastation’ of the Thai economy has been multiplied. Along with the lower demand for the Thai Baht from fewer tourists, Thai Baht faced a sharp depreciation during the pandemic.

How Will It Influence Investors’ Decision?

Although the current outbreak is influencing the economic activity and the foreign tourist’s arrival, the depreciation of the Thai Baht will become a supporting factor for their exports. In June, exports increased remarkably by 43.8% y-o-y which is the fastest rise in 11 years. Outbound shipments of vehicles and automotive parts, and computers and parts rose 78.5% and 21.6% respectively.

Along with the depreciation of the Thai Baht and adjusted property prices, the long-term investors will have a better return with much lower cost. With a strong export, it will widen Thailand’s trade surplus which will lead to the appreciation of the Thai Baht in the future. The current depreciation is good timing for long term property investors.