The baht has lost half of 2019’s gains in just a month, hit by emerging market outflows and as the spread of a flu-like virus in China threatens the country’s tourism sector.
The baht was emerging Asia’s best performer last year, rising 8.8% against the US dollar. Since the start of 2020, the currency is now the region’s worst performer, down nearly 4% as investors weighed the economic impact of the coronavirus and China’s slowdown on the economy.
China’s ban on group tours to help contain the spreading virus that has left 170 people dead, will take a toll on the tourism industry, a key driver of growth.
China is Thailand’s biggest source of foreign tourists, with 11 million visitors last year making up 28% of the total. The Tourism Authority of Thailand expects 2 million fewer Chinese visits this year.
China was also Thailand’s top foreign investor and second-largest export market last year.
Jitipol Puksamatanan, chief markets strategist of Krung Thai Bank, said virus cases would affect tourism. The country’s health authorities have detected 14 cases, the most outside of China.
“Importers are also panicking, rushing to buy dollars for fear that the baht will weaken further,” he said, adding the baht might reach 32.5 per dollar in the current quarter.
The baht was at 31.11 per dollar on Thursday, at a seven-month low. It had reached a more than six-year high of 29.91 last year.
“In the short term, a weak baht is good for exports, which should not contract,” said Ghanyapad Tantipipatpong, chairwoman of the Thai National Shippers’ Council.
But the outbreak has compounded problems for the economy as exports already took a hit from the Sino-US trade war and investments were slowed by a delayed 3.2-trillion-baht fiscal budget.
The finance ministry on Wednesday slashed its 2020 growth outlook to 2.8% from 3.3%, after it estimated growth would be 2.5% in 2019, a five-year low.
With new headwinds, the baht could head lower on outflows.
The central bank, worried about the baht’s strength, had announced plans to further relax rules on capital outflows and was expected cut rates further to help growth.
Foreign investors have sold a net 12 billion baht worth of Thai shares this year, as the stock market hit three-year lows, with tourism shares sliding.
Manufacturing will be affected next if the China shutdown to contain the virus extends beyond early February, said Kobsidthi Silpachai, head of capital markets research of Kasikornbank.