Economists Predict Baht Could Plunge to 38 This Year

Economic experts believe the baht’s value could fall to 38 per US dollar this year as the world’s largest economy’s currency strengthens after the Federal Reserve pursues aggressive monetary policy.

Kasikornbank (KBank) head of capital markets research Kobsidthi Silpachai predicted the baht would fall to a range of 36.50-38 against the dollar in October.

According to Mr. Kobsidthi, the baht will depreciate after continued increases in the federal funds rate result in the dollar appreciating against other currencies.

Predictions show that the baht will remain highly volatile in line with money markets worldwide due to internal and external factors, he added.

Meanwhile, the Monetary Policy Committee (MPC) of the Bank of Thailand is expected to raise the benchmark policy rate by 25 basis points at its meeting next week.

If the rate is raised from the current 0.75%, it will strengthen to 37 per dollar next week. However, after that, the Thai currency would fall as the US currency fortifies again, Mr. Kobsidthi added.

According to KBank estimates, the baht will strengthen again this year to hit 35 against the dollar in recent months, reinforced by tourism revenue.

KBank also expects the MPC to raise the policy rate by another 25 basis points to around 1.25% at its November meeting, Mr. Kobsidthi went on.

In a similar development, the head of the research economists office at CIMB Thai Bank (CIMBT) said the bank was forecasting the baht to hit 38 to the dollar due to the US currency strengthening amid the Fed’s rate hikes.

Mr. Amonthep said that CIMBT predicts that the Bank of Thailand will raise its policy rate to 1.75% in November before announcing further increases to 2.5% by the end of 2023.

“We expect the central bank will raise its policy rate two times, each by 50 basis points, this year to contain the spread between Thailand’s rate and the Fed funds rate. The move should help slow the baht depreciation,” he stated.

Although the stronger dollar will affect other currencies in the region and the inflation rate is expected to reach 6.2% on average for this year, the economy should continue to recover due to the tourism sector’s revival, the CIMBT said.

Mr. Amonthep also said that the country’s GDP growth in 2022 is expected to reach 3.2%.