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Baht’s rise due to continuous current account surplus: BOT


webfact

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Just now, zaZa9 said:

"We should increase our imports ..."

Of course they should.

But the disincentive is stupidly high import duties , and all sorts of shenanigans by Customs Officers that lead individuals to just give up...

 

While the baht  was skyrocketing in value , laws were passed to  increase the taxes on foreign cars , ban the import of collectable cars , and ban  even spare parts for those already here  ( ! ) and wine volumes recalibrated to a larger tax threshold .

This is the opposite of growing imports !

 

And try and get any  serious money out of the country !

They wont let it happen.

Quote

And try and get any  serious money out of the country !

They wont let it happen.

I know of one ginormous amount that left the shores in the last few years!!

 

 

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2 minutes ago, Sticky Wicket said:

But with an opaque junta govt there will always be plenty 'off the books'.

Doesn't take much for people to go missing if they don't tow the line!

The thing with government numbers is there's a long published history that can't be disputed. I personally have watched the foreign currency reserves grow every month along with all the other numbers such as budgets, GDP and exports etc. Today's government can''t go back and change that history so one of the first  questions that gets asked when new numbers come out is, how do the new numbers compare to the history. If the new numbers are way out of line then it's time to ask serious questions, but they aren't, they all pass the sniff test and then some.

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22 minutes ago, deej said:

^^^^ exactly.  that the very reason. he confuses me????

With all due respect mate you're confused because you don't understand how the system works and how the pieces fit together, you do what lots of others do and see only the end result and its negative effect on you personally and you grab the popular reason why its happened.

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4 minutes ago, mikebell said:

How many 800,000 baht visa accounts help swell this surplus?

I did the calculation once and concluded there would be almost zero impact on the Thai economy if every expat in the country withdrew 600K baht each (the midpoint between 400k and 800K) and shipped it back home. That said, individual banks may get a bit stressed if that happened since their deposit base would shrink for a while.

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24 minutes ago, saengd said:

With all due respect mate you're confused because you don't understand how the system works and how the pieces fit together, you do what lots of others do and see only the end result and its negative effect on you personally and you grab the popular reason why its happened.

No negative effect on myself whats so ever. in fact good as gold

Its your perogative to follow  the economics figures of the  present crowd  who i would not trust  as far as i could throw them.

There  rise to power was enuff to see. and the normal Thai Citizen knows that.

A march was held last weekend  just a entree of things to come .in due course 

Edited by deej
made my point clearer by adding econmics to my post thk u
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1 minute ago, deej said:

No negative effect on myself whats so ever. in fact good as gold

Its your perogative to follow  the present crowd  who i would not trust them. as far as i could throw them.

There  rise to power was enuff to see. and the normal Thai Citizen knows that.

A march was held last weekend  just a entree of things to come .in due course 

Cool!

 

People have been saying those things here for as long as I can remember. Even in 2010 (?) when there were tanks on the streets and snipers were shooting people on Silom, tourists were still flying into Swamply and on to Phuket, in the meantime exporters were still exporting. 

 

But to be perfectly clear, I do not follow or support anything to do with government, my interest is economics, that's all.

 

 

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43 minutes ago, saengd said:

I'd really like people to think about the subject and understand better how the system works, that's all.

 

I appreciate you taking the time to type concisely on this matter. I have a fair grasp of basic business and accounting but when the international variables are added to the mix, things get murky for me. So you commentary sans emotion is welcomed.

 

Any links high is clarity and low on jargon you could provide would be welcomed, too.

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14 hours ago, sweatalot said:

So they think in the present it is not needed?

Delusion, real  or pretended

Of course it's not needed yet. The Filthy Rich haven't stoped buying Foreign money yet ,they still are greedy for more foreign money.

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1 hour ago, saengd said:

 

I tried hard over a couple of years to argue that it was more than a blip and sadly ended up with the label of the TVF poster who talked the Pound down.... when I said I was going "all in" to THB people said I was barking mad. At 60 to the Pound I forecast 40 +/- 5% and I was pilloried mercilessly. Fortunately for me I came out on the winning side of the deal and we hit 40 but everyone went very quiet by then, many had been forced to abandon retirement here and had gone home.....exchange rates and eligibility for my visa extensions were never a problem from that point on.

 

 

(Above quote edited/shortened by silver sea)

 

Out of interest, what is your prediction over the next few years for THB and GBP and USD?

Edited by silver sea
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3 hours ago, saengd said:

Good question. The answer is that THB is managed via a floating peg rather than a hard peg, if it were hard pegged the two would move in unison. But the floating peg, commonly known as the dirty peg, for good reason, means that BOT can chose to keep the Baht in the upper part of the range OR that market/economic conditions make that happen regardless. In the current situation it's the economic conditions that are forcing THB into the upper reaches of the range and the trade imbalance is responsible for this. The fluctuations occur because THB is a fairly small currency, dealers refer to it as a boutique currency which requires very little effort or volume to make it move one way or the other, ripples are felt as a result of small hits. For example, the Baht strengthens slightly at month end because that's when most US SSc checks are paid so the sale of USD and purchases of THB have a moving impact.

May I add that many exporters work with contracts or fixed sales prices. So in the end the exporter will feel the pain.  We might also take in account that most of these exporters import there raw materials in... USD...so that balances some sales out. Just the surplus in sales can cost them..

As for the local economy the strong baht means that goods and services are more expensive for tourists, but might be cheaper for locals as imports are less expensive, but only of course of the shop/service provider reacts accordingly with lower prices...

Some of that effect can be seen in gas prices...now of course higher due to higher oil prices

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19 hours ago, snoop1130 said:

Thailand's central bank is still concerned about the strength of the baht THB=TH and is ready to take further action if necessary, a deputy central bank governor said on Tuesday.

Strange, you are always ready but, you never do, why? You and your friends have not yet cashed enough!
Be careful, the bubble is expanding and a bang will also be felt in the USA!

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10 hours ago, saengd said:

"The central bank may further relax capital outflow rules to make it much easier for these funds to invest overseas, he said".

 

This doesn't seem to have much effect, Thai exporters want to hold Baht not Dollars plus overseas investments don't seem to be their thing (except corporate investment). Many posters will automatically think this will mean they can transfer money out of Thailand more easily, it doesn't, nothing will change when it comes to transactions by foreigners, only those by Thai nationals.

 

"The central bank has blamed the country's high current account surplus and low domestic investment as main causes of the strong baht". 

 

Driving around the North yesterday I was struck by how much construction work is underway, new major road expansions (Chiang Mai/Lamphun), two new large hospitals/buildings Lamphun & San Sai, new court houses (Lamphun/Lampang), new airport planned (Chiang Mai) government is spending money and building out infrastructure, if this is being repeated elsewhere in the country the government is investing huge amounts of money in the economy.

You are right. I have recently returned from our annual Christmas/New Year trip  - Chiangmai to Surin.

  • There is ultra-massive investment in an overhead road system near Nackon Ratchasima nearing what seems to be completion for this stretch of whatever new road systen is under way.
  • In Surin province, the A24 road has been upgraded into a huge stretch now converted to excellent dual carriageway. From Prasat to the Cambodian border, that road too is under way for the same treatment.
  • The A24 from Prasat to Ubon Ratchathani, (?) appears to be now nearing completion.
  • The main highway Nackon Sawan - BKK is being resurfaced.
  • Roadworks underway at Samkaeng Phet.
  • Plus all the work mentioned above under way around CM implies that other projects are up and running in other areas of the country, bearing in mind that I only travel on 8-9 highways on my annual trip.

Big investment going on - I wonder under whose guidance this is all happening?

 

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3 hours ago, silver sea said:

(Above quote edited/shortened by silver sea)

 

Out of interest, what is your prediction over the next few years for THB and GBP and USD?

I don't have a crystal ball so I can only guess at what it might be, just like anyone else can and I can be equally as wrong. Personally however my money is on GBP/THB remaining strong and I've no intention of taking the profit on my THB holdings, I would not be at all surprised if the pair reached 30 within five to seven years but much depends on how BOT manages the current overstrength and how the economy responds, longer term however it remains a good investment, for me personally.

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2 hours ago, jumbo said:

May I add that many exporters work with contracts or fixed sales prices. So in the end the exporter will feel the pain.  We might also take in account that most of these exporters import there raw materials in... USD...so that balances some sales out. Just the surplus in sales can cost them..

As for the local economy the strong baht means that goods and services are more expensive for tourists, but might be cheaper for locals as imports are less expensive, but only of course of the shop/service provider reacts accordingly with lower prices...

Some of that effect can be seen in gas prices...now of course higher due to higher oil prices

gas prices in Thailand are not a great indicator because the price is managed by the government, their objective is to smooth any price changes which is why prices change so frequently compared to say the UK where they can change daily.

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1 hour ago, Bundooman said:

You are right. I have recently returned from our annual Christmas/New Year trip  - Chiangmai to Surin.

  • There is ultra-massive investment in an overhead road system near Nackon Ratchasima nearing what seems to be completion for this stretch of whatever new road systen is under way.
  • In Surin province, the A24 road has been upgraded into a huge stretch now converted to excellent dual carriageway. From Prasat to the Cambodian border, that road too is under way for the same treatment.
  • The A24 from Prasat to Ubon Ratchathani, (?) appears to be now nearing completion.
  • The main highway Nackon Sawan - BKK is being resurfaced.
  • Roadworks underway at Samkaeng Phet.
  • Plus all the work mentioned above under way around CM implies that other projects are up and running in other areas of the country, bearing in mind that I only travel on 8-9 highways on my annual trip.

Big investment going on - I wonder under whose guidance this is all happening?

 

I think it's government trying to stimulate the economy by building out infrastructure, that's what they were advised to do by the World Bank and the IMF.

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25 minutes ago, Banana7 said:

The BOT has many many restrictions on baht outflows from Thailand. BOT has too many rules and regulations for currency flows.

Restrictions for foreigners yes, for Thai nationals, much less so.

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Britain has the lowest inflation rate for the last three years putting pressure on the Bank of England to lower interest rates again.  With Johnson's cavalier approach of keeping a possible no deal on the table makes the business community nervous and so the confidence level is still relatively low.  In other words don't expect the pound to strengthen much over the next few months.  

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On 1/14/2020 at 2:22 PM, webfact said:

“We should increase our imports of infrastructure and machinery to improve Thailand’s production, at a time when the baht is appreciating,” he said. “Also, relevant agencies should reduce the baht’s purchasing strength in the export sector, by keeping Thai revenue in foreign currency deposits.”

 

Oh yes, like Prayuth going to buy 3500 buses 5 years ago....that was a good joke!

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5 minutes ago, starchild5 said:

Bring Soros Back..He will crash Thai Bhat in Few Weeks ????

The 97 crash came about when the Baht was hard pegged to USD, it was when the peg was released and the currency floated that the crash took place, currently the Baht is on a managed floating peg rather than a hard peg.

 

And the foreign currency reserves back then were very small by comparison today plus they were all tied up in long dated securities so there were no tools with which to fight, today is a totally different picture.

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3 hours ago, saengd said:

I don't have a crystal ball so I can only guess at what it might be, just like anyone else can and I can be equally as wrong. Personally however my money is on GBP/THB remaining strong and I've no intention of taking the profit on my THB holdings, I would not be at all surprised if the pair reached 30 within five to seven years but much depends on how BOT manages the current overstrength and how the economy responds, longer term however it remains a good investment, for me personally.


 

Thanks for giving your crystal balls a polish.

 

When the polls closed on UK election night, and after the first results started to come in, indicating a Tory victory, GBP was 40.66 THB. By the next morning, it was 40.22, up from 38.00. So although the Tories’ win was big enough to ensure that a second referendum on leave/remain was unnecessary, there was not the big surge in the GBP’s value against the baht that had been predicted by the TVF Brexiteers over the last few months.
 

As has been said many times on these Forums, for TVF expats the most important currency relationship is USD - THB. Over the last three years, the referendum result has been factored in by the markets, and so there was not much movement in the pound on election night.
 

A Jeremy Corbyn Labour victory, or a hung Parliament, would have unsettled the markets in a big negative way, because of the implications for the UK economy.

 

Similarly, a hard Brexit, which could still happen, would also have a big negative effect on the pound’s value.

 

Below is a political prediction for 2020 and 2021 by the Observer’s senior political analyst, Andrew Rawnsley, which he wrote at the end of last December. Politically, he is a centre left, so perhaps a bit of a Blairite (Tony Blair), and who thinks that Boris Johnson is totally untrustworthy as both an individual and as a politician.
 

Andrew Rawnsley:

 

”The UK’s membership of the European Union will be terminated at the end of January, but that’s not Brexit done. We then enter a transition period while there are tough and complex negotiations about the future relationship with our closest neighbours and most important trading partners. 

 

Boris Johnson says he can secure a zero-tariff, zero-quota free trade deal without having to commit to regulatory alignment with the bloc. The EU suggests it will never agree to this. 

 

The Tory leader has further upped the stakes by declaring that the UK will crash out of the transition without a deal if there’s no agreement by the end of the year:
 

https://www.theguardian.com/politics/2019/nov/06/can-britain-reach-a-trade-deal-with-the-eu-by-the-end-of-2020

 

Will he really take such a big risk with the British economy, especially its manufacturers and the livelihoods of the voters in the Midlands and the north of England who helped him to a majority? 

 

By the end of the year, either his bluff will have been called or he will betray those new Tory voters.

 

There will not be another referendum on independence for Scotland in 2020. The SNP will demand it, but without any real conviction that it can get one from a Conservative government that has set an adamantine face against the idea. 

 

This refusal will suit the Nationalists. Current polling suggests that they can’t be confident of winning a referendum now, and a second defeat would surely kill their ambition for a long time. 

 

The SNP’s true aim is to stoke Scottish resentment against Westminster to pave the way for a big win in the elections to the Scottish parliament in 2021. That’s the year with the potential for a constitutional car crash that rips apart the kingdom.”

 

 

If he is right in his prediction, then unfortunately, GBP is going to have a tough two years. Ex pats will count themselves lucky if GBP can maintain its current value during that period.

 

 

 

Edited by silver sea
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