BANGKOK – When new Bank of Thailand (BoT) Governor Sethaput Suthiwart-Narueput assumes his post on October 1, one of his first crucial challenges will be how to deal with the kingdom’s strong currency, the baht.
In 2019, the baht appreciated 9% against the dollar, one of the best currency performances in Asia.
Kasikorn Research Center, a Bangkok-based think tank, has predicted that the baht is likely to remain strong vis-à-vis the dollar throughout 2020, despite the ravages of the Covid-19 crisis and record low-interest rates of 0.5%.
Thai gross domestic product (GDP) is projected to contract 8-10% this year. GDP contracted a whopping 12.2% in the second quarter (2Q20).
The baht’s strength is thus more a reflection of market perceptions of still-strong underlying financial fundamentals rather than projected weak economic performance.