Strong or weak baht?
During my vacation here in Thailand I noticed that government ministers and representatives of the export industry have been calling for the central bank to weaken the baht. First of all it is important to remember that the responsibility of a central bank is to protect the purchasing power of all its citizens and not only minority interest groups.
Second, it is unfair to compare the baht to the US dollar or yen, since these two currencies represent governments that are running massive budget deficits combined with enormous debt levels and future entitlement obligations. Rather Thailand should compare its currency with trading partners in the region that are running more sound fiscal policies, such as China, Malaysia, Singapore, the Philippines and Australia.
Third, most export companies use imported goods and raw materials to produce their goods. Any short-term loss in volumes due to a stronger baht can be more than made up in higher profit margins. Furthermore, if the government could combine a stronger baht with simplified regulations for business we might get a win-win situation where the poor in Thailand can increase their purchasing power and companies can become more efficient.
You don't win elections by making the purchasing power of the masses weaker. You win elections by giving them more bang for the buck. People don't want handouts as they know the handouts won't last. People want to enjoy the fruits of their daily labour. They will get more of that through a strong baht and a sound monetary policy.
The losers of such a policy would of course be us foreigners who come to visit Thailand. But even though our purchasing power (in baht) will be reduced, most of us will come back anyway because we love the place. And if we are lucky a strong baht may help Thailand develop in a more sustainable way?