We all know that since the beginning of 2022, the Thai Baht (THB) situation hasn’t been doing so well—at least from the Thai households’ point of view. The THB is progressively devaluing, and many may be wondering what that would entail. Simply speaking, right now we have to spend more THB in the exchange of the same amount of dollars, euros, or other currencies as before. On the other hand, foreign currencies can now be used to buy more THB. That is, The Thai Baht is getting weaker and holds less value against the foreign currencies. 

The important reasons why the Thai Baht has weakened

If we consider the vital factors which affect the THB, many analysts and investors would point to the US federal bank having recently raised the interest rate and implementing quantitative tightening (QT) to deflate growth and liquidity of the USD in the economy. They would also point to the fact that more people are choosing to keep their money in USD instead of THB, as Thailand is experiencing slower growth. 

Another factor which contributes to the weakening of the THB would be the ongoing war of Russia in Ukraine. The situation has so far resulted in the increased consumer prices in Thailand and globally, and that just adds to the already existing inflation. In May, 2022, the Ministry of Commerce announced the inflation rate to be 7.1%, which is the highest rate of inflation ever in 14 years. 

From these factors, we could conclude that as the Fed increases their interest rate in the US, the capital and investments will flow into the country with better returns on investment. That is possibly why many Thais have now decided to buy more USD; they need to do that for the returns and to counter the fallen spending power in THB. These all contribute to the Thai Baht eventually weakening in its value. 

Who is benefiting from this weakening of the Thai Baht?

– Exporters, as they can exchange their received foreign currencies for more THB. 

– Foreign tourists, because now they can exchange their foreign currencies for more THB. 

– People who work overseas, because their income in a foreign currency can be turned into more THB. 

However, the ones who are at the most disadvantaged position in this situation are inevitably the people who reside in Thailand, or who buy products from foreign countries— including importers, investors, and people who sign up for foreign loans. It is a sensitive time and circumstance which needs constant attention as to what will unfold in the near future. But above all, it is now perhaps a prime time to consider saving more and spend your money wisely, and be hopeful that the situation will resolve soon. 

Concerned about your decreasing spending power in Thai Baht, and are looking for a strategy to counter this crisis? Actio offers business and financial consultancy services to help you plan and optimize your spending, savings, and investment in this critical time.

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