“Too Dependant on External Demand” Says Economist as Thai Baht Falls amid Virus Fear

In 5 February 2020, Bank of Thailand announced to reduce the policy rate by 0.25% which effective immediately to batter the coronavirus outbreak as it already hurt the Thai economy.

Following the stimulus measure, Thai baht has flipped from Asia’s strongest currency in 2019 to one of the region’s worst performing this year, baht lost around 4.1% against US dollar, reversing almost half of its 7.9% gains in 2019, reported CNBC.

Today Thai baht currency has deprecited to 31.18baht per 1 US dollar.

BOT has cut interest rate to all-time record low, to stop the slowdown economic as Thailand is facing the crisis of economic recession and was hope to boost its growth by the tourism sector, especially from the Chinese visitor during the Lunar New Year, but the country was strongly hit by the unexpected virus spreading.

Trinh Nguyen, senior economist at French investment bank Natixis, said that Thailand is too dependent on external demand especially China.

She pointed out that tourism revenue from China accounts for around 2.7% of Thailand’s GDP, while exports to China make up some 6% of the country’s GDP. Thai Tourism Ministry has estimated the decrease in Chinese tourists could result about 50 billion baht lost of overall tourism sector revenue.  

Nguyen added that “This is why we slashed GDP forecast to only 2.2% this year and that means that Thailand is very short of the World Bank target of 5% if it wants to reach high income status in about a decade,”

Coronavirus death toll rose to 636 and confirmed case hit over 31,000 cases in China. Moreover, today early morning, China has reported the newborn as the youngest case. The baby tested positive for the virus 36 hours after he was born.

Prakash Sakpal, Asia economist at Dutch bank ING said on Wednesday that “We don’t think one rate cut will be enough in preventing the growth slowdown, let alone boosting growth,”

“We believe the (Bank of Thailand) would want to remain ahead of the curve in its policy response to the evolving situation. If so, another cut at the next meeting in March makes more sense as a timely, and probably more effective, boost to the economy,”

Nguyen suggested Thailand to make its economy more competitive for the long-term growth. “The virus outbreak could be an opportunity to reduce its reliance on “volatile sectors” like tourism,” she added.

She stated Thailand’s economy is necessary to “diversify income sources so that Thailand can itself generate its own growth.” “Otherwise, they’re stuck in a trap where despite everything that they do, they cannot generate sustained domestic demand particularly investment and consumption,”