Thai baht plummets amid political unrestBy Casey Hynes Jan 06, 2014 12:16PM UTC
The political scene is not the only institution to have been shaken by ongoing protests against Thaialnd’s interim Prime Minister Yingluck Shinawatra and her government. The financial system has also seen worrying news following the upheaval, with the Thai baht falling for 10 straight days after an already disconcerting year, according to The Jakarta Globe.
Bloomberg News reported that as of January 2, Thai stocks were off to the worst start seen since 1988 and the baht was on an 11-day falling streak. The currency is now experiencing three- to four-year lows against the major Western currencies.
Both The Jakarta Globe and Bloomberg quoted Saktiandi Supaat, head of foreign-exchange research at Malayan Banking in Singapore, as saying, “Portfolio flows will be affected given the ongoing political situation. … The question is whether the central bank is going to make any moves to ease policy.” Such decisions may be made at a meeting of the central bank later in January.
Elections are scheduled for Feb. 2, but anti-government protest leader Suthep Thaugsuban and his legion of followers are continuing to upset daily activities in Bangkok. They have declared that they will besiege the city on Jan. 13, an announcement that has no doubt made investors in the country nervous. Indeed, Bloomberg reported that “[g]lobal investors pulled $1.3 billion from Thai stocks last month.” The opposition has called for a delay in the Feb. 2 elections, and for the prime minister to step down and allow an unelected people’s council to take power.
That organization quoted Itphong Saengtubtim, the head of research at KGI Securities (Thailand) Pcl, on the impact the protests have had on the tourism industry, a lucrative sector of the economy that has recently begun to feel blowback from the ongoing protests: “The political crisis has badly hurt the Thai economy with delays in state spending, declines in consumption and investments,” he said. “The tourism sector, which was the economy’s only bright spot, is also beginning to feel the adverse impact with plans for more demonstrations in Bangkok.”
Though the protests had been seemingly peaceful, recent reports of deaths and injuries may keep increasing numbers of tourists from visiting Bangkok, and Thailand generally, as the capital is a major transportation hub and arrival destination for international visitors.
For those who do decide to holiday in Thailand, the weak baht means they will get significantly more bang for their buck. Today, 1 euro buys just under 45 baht, compared to 39.8 baht a year ago.
Financial news out of Thailand has been grim since the second half of last year, largely attributed to ongoing political unrest. Stocks fell in October during debate and opposition to a proposed amnesty bill that would have eased the way for self-exiled former prime minister Thaksin Shinawatra’s return.
In December, as protests increased, with calls from the opposition for Yingluck Shinawatra to step down, the baht fell but stocks were able to recover for a time, illustrating the volatility of the Thai markets right now. Just before Christmas, Reuters reported that the baht had fallen to its lowest in nearly four years, with 32.71 baht to the U.S. dollar. It has fallen even more since.
With the opposition’s promise to besiege the capital on Jan. 13, and ongoing uncertainty about the impending elections, the baht and the Thai stock market will likely remain volatile for the foreseeable future, potentially disrupting vital industries.