The Nation



Internal, external factors combine to drag down baht

Some protesters are seen from the inside of the Finance Ministry's building. Though the ministry is under protesters' siege, officials say that budget disbursement is not disrupted. (EPA)

Some protesters are seen from the inside of the Finance Ministry's building. Though the ministry is under protesters' siege, officials say that budget disbursement is not disrupted. (EPA)

Continuing political turmoil, uncertainty over US QE policy main factors

The protests that have rocked Bangkok, and uncertainties over US intentions on its quantitative easing (QE) programme have put pressure on the baht, which continues to depreciate.

Benjarong Suwankiri, head of TMB Analytics at TMB Bank, said the depreciating baht and the stock market's slump resulted from a mix of internal and external causes.

Externally, the United States is expected to taper its asset purchases soon, while locally, the protests against the government have been prolonged, prompting foreign capital to flee Thailand consistently. If the political protests, which started on November 1, drag on much longer, more foreign capital would move out, which would pull the Thai currency down further, Benjarong said.

The baht softened to 32.359 per US dollar yesterday, the weakest level since September 6, according to Bloomberg. It has declined 3.7 per cent since the demonstrations began.

The baht has weakened faster than expected, he said. The earlier estimate was 32.50 per dollar by mid-December. However, the currency weakened early in the month, reflecting consistent foreign-capital outflows, while the Thai capital markets have seen shorter foreign investors' equity holdings on expectations of QE tapering in the near term.

The local protests, which have continued for more than a month, have been affecting the Thai economy and investor confidence at a certain level and could affect next year's growth, Benjarong said. Foreign tourists have recently changed their behaviour, spending less time in Bangkok and more in other provinces.

Gross domestic product expanded by 2.7 per cent in the third quarter year on year, the slowest pace since the first quarter of 2012. The Bank of Thailand and the Fiscal Policy Office have lowered their 2013 growth estimates to about 3 per cent, while Finance Minister Kittiratt Na-Ranong has conceded that the actual figure could be even lower.

Benjarong said the markets had been waiting for the government's measures to stimulate growth next year.

The SET Index has dropped 16 per cent since the US Federal Reserve said on May 22 it might reduce its US$85 billion (Bt2.7 trillion) of monthly bond purchases, according to Bloomberg. The index yesterday slumped by 15.06 points to 1,361.57.

Meanwhile, Deputy Prime Minister and Finance Minister Kittirat Na Ranong acknowledged that the ongoing political tension had a negative impact on the country's tourism image. But he believed the outlook would rebound quickly, once the situation returns to normal. He urged all parties to work more cohesively to rebuild tourists' confidence.

Yesterday, he met with tourism-related associations and operators to hear their ideas on boosting tourism and tourism spending during this festive season. He agreed to work with them to promote Thailand Grand Sales, to be held from December 16 until February 15 next year. He asked them to propose a clear package plan if they wanted the Finance Ministry to help, especially in regard to taxation.

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