KBank Forecasts Baht To Weaken Further Against US Dollar

Kasikornbank, also known as KBank, has forecast that the dividend repatriation by foreign investors and Thailand’s lower current account surplus would cause the baht to further weaken against the US dollar in June this year.

Dividend payments from SET-listed firms are expected to surpass 18.7 billion baht for May 17-21.

Besides, the amount is estimated at 6.53 billion baht for next week and, according to KBank, the repatriation of those dividends would continue to push the baht depreciation. Companies listed on the Stock Exchange of Thailand are scheduled to pay dividends from March to May this year, while the repatriation of dividends from offshore companies peaked at 20.6 billion baht from April 19 to April 23 this year.

According to KBank’s head of capital markets research Kobsidthi Silpachai, the bank predicted that the local currency would fall to 31.1 baht against the US dollar by the end of June.

Reports showed that Thailand’s current account surplus has declined from $38.2 billion in December 2019 to $3.90 billion in March 2021, pressing down on an increasingly weakened baht. Moreover, the lack of foreign tourist spending due to the pandemic has also caused Thailand’s current account surplus to continue declining.

The country’s vaccination rate, with only 1.12% of the population vaccinated, remains low compared to the global rate of 4.56%, the United States rate of 36.9%, and the United Kingdom rate of 29.6%.

KBank estimates that the baht will gradually appreciate, probably reaching 29.75-29.80 baht per dollar by the end of this year. It also said that a stronger baht could be backed by the government’s mass inoculation plan starting in June, leading the country to reopen its borders to tourists and boost economic activities in the second half of the year.

The global economic recovery is also anticipated to support Thai export growth and a firmer baht.

However, the third wave of COVID-19 cases and the economic contraction that the kingdom has experienced in the first quarter remain risk factors for the 2021 economic downturn, the bank added. As a result, KBank may readjust its economic growth forecast for later this year.