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Bangkok Post
a day ago
- Business
- Bangkok Post
Analysts expect baht to test 32 as US dollar weakens further
The baht could appreciate to test 32 to the US dollar or strengthen even further, as the greenback is set to weaken further amid mounting pressure on the Federal Reserve to cut the US interest rate at its September meeting, according to analysts. Following the Bank of Thailand's (BoT) policy rate cut of 25 basis points (bps), which would typically weaken the Thai currency, the baht moved in a range of 32.24-26 to the dollar in morning trade on Thursday, compared with Wednesday's close of 32.31 baht in offshore markets, according to Kasikorn Research Centre (K-Research). Most Asian currencies jumped on Thursday, led by the Indonesian rupiah and Malaysian ringgit, as the US dollar slipped to multi-week lows. 'The baht and other regional currencies, along with the world's major currencies, gained strength amid heavy selling of the dollar and a weakening US bond yield, both of which are pressured by the expectation that the Fed will cut rates at its September meeting,' said Kanjana Chockpisansin, head of the research, banking and financial sector at K-Research. The market is putting the odds of a cut of 25 bps at the Fed's Sept 16-17 meeting at 99.9%, according to the CME FedWatch tool, following Tuesday's release of inflation data, she said. US Treasury Secretary Scott Bessent said there is a possibility the Fed could cut interest rates by as much as 0.50% at the September meeting, considering the weakening employment figures. He also suggested the central bank's benchmark ought to be at least 1.5 percentage points lower than it is now. On Wednesday, the BoT highlighted the recent strength of the baht against regional currencies as an issue worth monitoring, as it affects the competitiveness of the country's export and tourism sectors. The baht is projected to appreciate further for the rest of the year, to 31.5 against the greenback, said Kuala Lumpur-based Maybank Securities. According to K-Research, the baht has appreciated 5.6% year-to-date, compared with a 7.5% gain for the yen and a 1.8% uptick for the yuan. The Philippine peso and rupiah strengthened by 1.3% and 0.3%, respectively, while the ringgit gained 6.5%. 'We see a possibility the baht can hit a range of 32.00-32.10 to the dollar from now until the year-end,' said Ms Kanjana, adding that Kasikornbank is maintaining its projection for the baht of 33.7 to the dollar at the end of 2025.
Bangkok Post
5 days ago
- Business
- Bangkok Post
Economists split over BoT rate decision
Following the reduction of the US reciprocal tariff rate on Thai exports, economists are divided over the Bank of Thailand's policy rate decision at the Monetary Policy Committee (MPC) meeting scheduled for Wednesday. Amonthep Chawla, chief economist at CIMB Thai Bank, said he expects a rate cut of 25 basis points (bps) to 1.50% at the meeting. He said the economic signals are weak, inflation is below the central bank's target range and loans are contracting -- all supporting the case for a policy rate cut. Although the US reduced its tariff on Thai exports to 19% from 36%, uncertainties persist, particularly regarding transshipment tariffs. "In the face of persistent challenges, lowering the policy rate is a reasonable step to support the economy," said Mr Amonthep, warning that Thailand could face stagnation from the fourth quarter of this year through the first quarter of 2026. Economic stagnation is a prolonged period of slow or no economic growth, often measured by low GDP growth and typically accompanied by high unemployment. This stage is characterised by stagnant wages, weak consumer demand, declining productivity and limited innovation. SCB Economic Intelligence Center (EIC), the research unit of Siam Commercial Bank, also forecasts a cut of 25 bps at the meeting, followed by another reduction in December, putting the policy rate at 1.25% by year-end. Thitima Chucherd, head of economic and financial market research at EIC, said despite the tariff reduction, the Thai economy will continue to face uncertainties and challenges. However, the 19% tariff rate is expected to support exports. EIC plans to revise its export forecast for this year from a contraction to marginal growth. The unit also intends to raise its GDP growth projections for 2025 and 2026 to roughly 2%, up from the current estimates of 1.5% and 1.4%, respectively. Kasikorn Research Center (K-Research), however, expects the central bank to keep the rate unchanged at 1.75% on Wednesday, noting the regulator has already lowered the rate by 50 bps since the start of the year. Nattaporn Triratanasirikul, deputy managing director at K-Research, said Thai GDP is likely to grow by nearly 3% year-on-year in the second quarter. The US tariff rate reduction should help to sustain export momentum and economic growth, with the research unit upgrading its 2025 GDP growth forecast from 1.4% to 1.5%, while its export projection was revised from a 7.4% contraction to 3.4% growth. Still, headwinds remain for the second half of the year, including ongoing uncertainty over US tariffs, especially transshipment penalties, a possible decline in foreign tourist arrivals and tensions between Thailand and Cambodia, according to K-Research. These challenges suggest the economy will require more support in the final quarter, she said. "We expect the central bank to cut its policy rate one or two more times in October and December, bringing it down to either 1.5% or 1.25% by year-end," Ms Nattaporn said.
Bangkok Post
03-08-2025
- Business
- Bangkok Post
Tallying the tariff trade-offs
The 19% US reciprocal tariff on Thai goods could offer some much-needed relief for businesses in Thailand, as this rate aligns with the regional average. However, several Southeast Asian nations including Thailand had to offer concessions, including opening up their markets to American products, often without a tariff. This change is expected to significantly reshape the trade landscape. How will these developments affect Thailand's local market and its export dynamics? RELOCATION POSSIBLE Nuttaporn Triratanasirikul, deputy managing director of Kasikorn Research Center (K-Research), said Thai exports likely to lose overseas market share because of US tariffs include jewellery, rubber gloves, pet food and home appliances. "Rubber gloves, in particular, will face stiffer competition from those shipped from Malaysia, while Thai-made pet food also has some outstanding rivals from other countries. These products are at risk of losing their overseas markets," she told the Bangkok Post. Locally produced pet food could become less competitive when Thailand lowers import duties on US products, along with internal combustion piston engines and medical instruments, according to K-Research. Internal combustion engines and medical instruments are among the top 10 products Thailand imports from the US, with auto parts heading the list. Other major import items are soybeans, pet food, food supplements, and machinery parts. "However, we are unlikely to see an influx of US products, which are positioned differently from the cheap Chinese goods that normally flood into Thailand. US-made goods are mostly intermediate high-tech goods that are not produced here in Thailand," said Ms Nuttaporn. If manufacturers in Thailand find it difficult to compete at home or abroad, they might freeze investments, she said. "Costs may rise for these manufacturers, making them less competitive and less likely to invest in capacity expansion," said Ms Nuttaporn. Looking to next year, if the US tariffs stay in place for long and the government does not address this issue properly, affected manufacturers could "possibly relocate their production" to countries where costs are lower, she said. Chanintr Chalisarapong, vice-chairman of the Thai Chamber of Commerce, said opening up the local market to US imports is an opportunity for change and reform. Regulations in several sectors, particularly agriculture, are outdated and these have "hampered Thailand's competitiveness", he said. Thailand has made progress in negotiations for a free trade agreement with the European Union, which Thai negotiators expect to conclude by the second quarter of next year. Officials hope a deal can help to offset the impact of US tariffs with greater market access to 27 European countries. "Thai exporters have to find new markets to help ease the impact of higher US tariffs. The Middle East, Eurasia and Latin America offer strong growth opportunities for Thai exporters, especially for pet food," said Mr Chanintr. UNPREPARED The Federation of Thai Industries (FTI) cautioned about the trade-off for opening up Thai sectors unprepared to face tougher competition in exchange for a reduced US tariff. Agricultural products such as meat and animal feed as well as certain industries are likely to bear the brunt if they are not protected against the import of rival products from the US, said Kriengkrai Thiennukul, chairman of the FTI. Herbal products and medicines should not be seriously affected if local manufacturers compete with American companies, but local petrochemical and chemical industries are not ready for a zero-tariff policy," said Mr Kriengkrai. Entrepreneurs in these industries need more time to adjust because they depend on imported raw materials, making it difficult for them to control production costs, he said. Agriculture is another sector vulnerable to zero duties on US imports, as Thai farmers will struggle to avoid a severe impact, said Mr Kriengkrai. "This will not be good for household income and economic growth in the long term," he said. SMEs IN TROUBLE A US reciprocal tariff of 19% is expected to significantly undermine the competitiveness of Thai small and medium-sized enterprises (SMEs), said Sompop Manarungsan, an analyst on the Chinese and US economies. Many food products in US grocery stores are produced by Thai SMEs, he said. "The question is whether SMEs even have a margin of 19% to cover the tariff. In order to survive, Thai SMEs must have at least a 30% margin, but how many do? Most of them operate on single-digit margins, especially in the food sector," said Mr Sompop. "Both large and small food businesses will struggle with a 19% tariff. We must find new sources of demand outside the US, such as domestic demand. We must also develop the service sector to drive growth, and use it to lead the manufacturing sector. For example, expanding tourism, healthcare, food service, sports and entertainment to eventually lift domestic demand." He also expressed concern about the outlook for agricultural products, particularly corn, soybeans and meat, as Thailand is unlikely to compete with the US because America operates plantation-style, mass-scale production, resulting in unit costs that are half of Thailand's, even after including shipping costs. Nowhere in the world can produce corn as cheaply as the US and Brazil, said Mr Sompop. If Thailand does not implement import quotas on such agricultural products, Thai farmers will be affected and the government may have to spend hundreds of billions of baht annually to subsidise the sector, he said. "More importantly, allowing US agricultural products to flood the Thai market would have a serious impact on the country's food security. How can we rely on imported pork forever, or foreign corn? If a war were to break out, what would we do? This is precisely why Japan has preserved its agricultural sector, even though domestic production is much more expensive than elsewhere," said Mr Sompop. "Japan allows only a small amount of rice imports from the US, despite consuming 10 million tonnes of rice annually. The US is granted a quota of just 770,000 tonnes, or 7-8% of Japan's total domestic consumption. Japan has never truly opened up its agricultural sector to the US in any substantial way." He said Thailand must position itself as a destination where wealthy people from around the world come to use services -- to travel, eat, seek healthcare, and enjoy entertainment. "We must not abandon production, but we will no longer serve as only a base for original equipment manufacturers, because we cannot sustain that role with a 19% tariff," said Mr Sompop. LOWER EXPECTED COSTS Visit Limlurcha, president of the Thai Future Food Trade Association and vice-chairman of the Thai Chamber of Commerce, said the US tariff deals enable America to export goods to many countries without a tariff. This could significantly benefit Thai consumers, as the removal of tariffs is expected to reduce the prices of US imports. For example, animal feed ingredients and electronic components from the US could be imported for processing or use as raw materials. These changes should lower production costs and provide savings for importers, leading to decreased prices for consumers and enhancing the competitiveness of Thai exports in global markets, he said. "Consumers can also look forward to a greater variety of products," said Mr Visit. Temperate fruit such as apples and grapes from the US as well as walnuts, almonds, cosmetics, pharmaceuticals, dietary supplements and vitamins could soon become more available at lower prices, he said. High-quality American products are likely to appeal to middle- and upper-income consumers already seeking these items, said Mr Visit. Last year Thailand imported goods worth 696 billion baht from the US. In the first half of this year, imports amounted to 358 billion baht. The main items included crude oil valued at 84.3 billion baht, machinery and parts totalling 33.7 billion baht, and chemicals worth 20.6 billion. Among consumer goods, pharmaceutical and medical products accounted for 7.81 billion baht, while fruit and vegetables reached 2.27 billion baht, and cosmetics totalled 2.16 billion, according to the Commerce Ministry. LIMITED IMPACT While US products will test the competitiveness of Thai exports, particularly for processed food and chicken, Mr Visit is confident in the strength and resilience of these local sectors. He said he expects Thai processed food, particularly chicken products, to retain their competitiveness thanks to robust production and export capabilities, alongside a sufficient domestic supply at competitive prices. Any US products in this category are likely to focus on niche or non-overlapping segments, said Mr Visit. "In terms of chicken products, Thailand can remain competitive, especially if we can purchase animal feed crops from the US at lower prices. This would reduce poultry farming costs," he said. Regarding the beef market, Australia is Thailand's primary source, holding a 96.3% market share. Last year, beef imports from Australia amounted to 2.66 billion baht, followed by imports from Japan at 75 million baht and New Zealand 16 million baht. All three countries operate under free trade agreements with Thailand, benefiting from zero tariffs, said Mr Visit. Increased US beef imports offer advantages and challenges, he said. They should enhance consumer choice in the premium beef market and could drive down prices due to heightened competition, as well as motivate local producers to enhance their product quality, said Mr Visit. This shift could give premium restaurants an opportunity to diversify their menus with higher-quality beef options, catering to both tourists and local consumers, he said. On the downside, small-scale Thai cattle farmers may face difficulties in adapting due to higher production costs compared with their US counterparts, who benefit from large-scale operations and cheaper feed. Moreover, consumer safety concerns remain regarding hormone use, chemical residues, and health risks such as mad cow disease, which are significant for both governments and consumers making decisions, said Mr Visit. Cheeta Ngohpraiwan, president of the Thaibrahman Breeders Association, said imports of US beef without a tariff would definitely impact the Thai beef industry, particularly the premium segment because US beef has lower production costs. However, he said local beef typically sold in wet markets for everyday consumption would stay competitive. "To reduce the potential impact on the Thai beef industry, the government should impose limits on the quantity of US beef eligible for the 0% import tariff," said Mr Cheeta. Authorities also need to enact rigorous checks to combat the smuggling of beef, which has long plagued the mass market for beef in Thailand, he said. "Smuggled beef not only harms the local beef market, but also deprives Thailand of tariff revenue from these illegal imports," said Mr Cheeta. Addressing smuggled live cattle from neighbouring countries would also help increase local beef prices, he said. Mr Visit said Thailand can become a regional leader in cattle breeding, as its neighbours and China display a robust demand for live cattle, creating an opportunity for Thailand. By establishing a strong brand, such as "Quality Thai Beef Cattle", or achieving geographical indication status similar to Korat Wagyu, he said Thailand could enhance the value of its beef cattle and distinguish its products in the marketplace. The halal market presents another promising avenue for growth, especially in Malaysia, Indonesia and the Middle East, all of which have a heightened demand for it, said Mr Visit. "To maximise these opportunities, we must enhance the quality of the farms and cattle breeds to align with international standards, create comprehensive traceability systems, obtain global certifications, and implement proactive marketing strategies to ensure global visibility for Thai beef brands," he said. PORK SECTOR SQUEALS Sitthiphan Thankiatphinyo, president of the Swine Raisers Association of Thailand, voiced concern over the decision to open the Thai market to US pork, warning it could severely impact independent pig farmers nationwide. "If US pork enters the market, many independent farmers could be forced out of business," he said. Mr Sitthiphan said Thailand produces around 1.1 million tonnes of pork annually, primarily for domestic use. Roughly 1-2% of production is exported to neighbouring countries due to domestic oversupply. Thailand is home to more than 100,000 independent pig farmers and another 50,000 to 60,000 involved in contract farming. Large agribusinesses account for roughly 60% of total pork production, with the remainder coming from independent farmers outside of contract systems. NO PRICE WAR Kawee Sakawee, chairman of the Thai Alcohol Beverage Business Association, said Thailand does not import significant amounts of alcohol from the US. While some American beers and spirits are available in the market, they are not major players. Most of Thailand's imported alcohol products come from Europe. In recent years, imports of plum wine from Japan and soju from South Korea have increased, he said. Mr Kawee said even without import tariffs on US alcohol, it would not lead to a sudden surge of American alcohol product imports. "Some importers might test the market with trial sales of US alcohol in Thailand, which is a common approach when exploring a new market," he said. "The key factor is how Thai consumers react to these offerings." Mr Kawee recalled when Thailand temporarily waived import duties on wine last year, it encouraged foreign wine brands to enter the market. High tariffs previously limited their presence and price competitiveness. However, not all imported wine brands succeeded in the Thai market, he said. Eliminating import duties for US alcohol products could allow some premium American spirits to establish a presence in the country, but long-term success will always depend on consumer response, said Mr Kawee. Even with changing trade dynamics, he said he does not anticipate any price dumping in the alcohol industry. "Most brands are positioning themselves as premium products. Price wars would harm the industry and are not common practice," said Mr Kawee. CHIP FUTURE HAZY Phongprapha Napapruekchat, assistant vice-president at Krungthai Compass, a research unit under Krungthai Bank, said semiconductor products, which were initially excluded from the reciprocal tariffs, are now listed under Annex II in the sectoral category. This sector is expected to face additional tariff measures, anticipated to take effect by the first quarter of next year. Now only printed circuit boards are affected by the 19% tariff rate, said Mr Phongprapha. Meanwhile, Somchai Sittichaisrichart, managing director of SiS Distribution (Thailand) Plc, said smartphone makers such as Apple and producers of computer brands and networking equipment are already subject to zero duties for import into Thailand, meaning the agreement with the US eliminating tariffs on these items should have no impact.
Bangkok Post
31-07-2025
- Business
- Bangkok Post
Pundits see further rate cuts this year
The Bank of Thailand has room to cut the interest rate more than once for the remainder of this year to shore up the economy if the US tariff on Thai goods is not competitive with regional peers, say pundits. Kanjana Chockpisansin, head of the research, banking and financial sector at Kasikorn Research Center (K-Research), said the think tank projects the central bank's Monetary Policy Committee (MPC) will make at least one more rate cut this year. "More than one rate cut is possible if the US enforces a higher tariff rate on Thai exports than other regional economies, dampening Thailand's economic prospects in the second half of the year," Ms Kanjana told the Bangkok Post. If Thailand cannot secure a competitive US tariff, exports and private investment would be seriously hurt, while consumers would tighten their belts and spend less. The government has a limited fiscal budget to stimulate economic growth, she said. The MPC has three more meetings this year in August, October and December to consider a rate cut from 1.75%. The baht weakened to 32.68-32.70 against the greenback yesterday after the Federal Reserve on Wednesday kept the US interest rate unchanged at 4.25-4.50% for a fifth consecutive meeting. Fed chair Jerome Powell remarked the central bank is not in a hurry to trim the rate as it monitors the impact of President Donald Trump's tariff strategy on US inflation for the remainder of the year. The Fed has three more meetings this year. "The door seems to be completely closed for Fed movement in September. The October or December gathering is more likely [for a rate cut]," said Ms Kanjana. Asia Plus Securities projects the MPC to slash the rate by 25 basis points as early as August given the concern about economic deceleration when US tariffs take effect. "Fiscal measures cannot be fully implemented to lift the economy yet, and Thailand's inflation dropped for the third consecutive month by 0.25% year-on-year," noted the brokerage. As the dollar strengthens following the Fed's move and the release of sound US economic figures, K-Research sees a path for the baht to weaken to 33.70 to the greenback in the latter half of 2025, said Ms Kanjana.
Bangkok Post
29-07-2025
- Business
- Bangkok Post
Research houses anticipate baht to weaken this week
The baht is expected to weaken to around 32.85 per US dollar this week amid ongoing economic uncertainties. Kasikorn Research Center (K-Research) anticipates the baht will move within a range of 32.00 to 32.80 against the greenback between July 28 and Aug 1, weakening somewhat as several factors are likely to influence the currency's movement throughout the week. Key factors include the outcome of US-Thai trade negotiations, developments along the Thai-Cambodian border, and the results of the US Federal Open Market Committee meeting scheduled for July 29-30. Given these uncertainties, the baht is expected to exhibit greater volatility against the dollar this week compared with the previous week, with the potential for depreciation. Last week the baht strengthened to 32.11 against the greenback, marking its highest level since February 2022. The appreciation was supported by rising gold prices, while the dollar faced pressure from market concerns over the independence of the US Federal Reserve, amid ongoing criticism of the Fed chair's performance, according to K-Research. Krungsri Global Markets expects the baht to decline and move within a range of 32.25 to 32.85 per dollar this week. The currency weakened since last week amid heightened concerns over the Thai-Cambodian border conflict. Krungsri forecasts the Fed will keep its policy rate unchanged at this week's meeting despite criticism from the US government. In addition, trade negotiations between the US and other nations including Thailand could strengthen the dollar, putting pressure on the baht, noted the firm. Krungthai Global Markets also expects the baht to continue depreciating, with potential two-way risks influenced by both the dollar and global gold prices. The ongoing US-Thai trade talks may also be tied to the border tensions with Cambodia, noted the trader.
