China virus takes a toll on baht
(NST) – The baht lost half its gains achieved last year in just a month as the spread of the flu-like virus in China threatens the country’s tourism sector.
Emerging as Asia’s best performer last year, it rose eight per cent against the United States dollar.
However, since the start of the year, it is now the worst performer in the region — down by about four per cent due to the economic impact of the coronavirus.
According to the Bangkok Post, China’s ban on group tours would take a toll on the tourism industry which is a major driver of growth for Thailand.
Most of the tourists to Thailand are from China, with 11 million visitors last year, which is 28 per cent of tourists arrivals.
The Tourism Authority of Thailand said it expected two million less visitors from China this year.
China was Thailand’s top foreign investor and second-largest export market last year.
Krung Thai Bank chief market strategist Jitipol Puksamatanan said importers rushed to buy dollars for fear that the baht would weaken further.
The baht was at 31.11 per dollar on Thursday, at a seven-month low. It had reached a more than six-year high of 29.91 last year.
“In the short term, a weak baht is good for exports, which should not contract,” said Thai National Shippers’ Council chairman Ghanyapad Tantipipatpong.
But the outbreak has compounded problems for the economy as exports already took a hit from the Sino-US trade war and investments were slowed by a delayed 3.2-trillion-baht fiscal budget.
The Finance Ministry on Wednesday slashed its 2020 growth outlook to 2.8 per cent from 3.3 per cent, after it estimated growth would be 2.5 per cent last year, a five-year low.
The central bank, worried about the baht’s strength, had announced plans to further relax rules on capital outflows and was expected to cut rates further to help growth.
Manufacturing will be affected next if the China shutdown to contain the virus extends beyond early next month, said Kobsidthi Silpachai, head of capital markets research of Kasikornbank.
“So the next shoe to fall is supply chain disruption. China sneezes…Asia catches the economic flu.”