The Thai baht has been hit by a sharp decline in tourism numbers due to the COVID pandemic, making the country’s currency the worst-hit in the region this year, according to Mizuho Bank.
In a note on July 23, the Japanese bank pointed to “uncharacteristic under-performance of the Thai Baht, rendering it the worst performer to date in 2021”.
Thai baht was the top performer in Asia before the pandemic. In 2019, the country was concerned about the strengthening Thai baht, which was buoyed by its large trade surplus. A stronger currency makes Thailand’s exports more expensive, causing them to be less attractive in global markets.
According to Refinitiv Eikon data, the Thai baht has steadily plunged more than 10% against the U.S. dollar year-to-date in 2021. This makes it the weakest-performing currency this year compared to other major Asia Pacific currencies.
Against the greenback, the Japanese yen is nearly 7% lower, the Malaysian ringgit declined by 5%, while the Australian dollar is down 4.43% in the year-to-date.
Even though tourism decline is not the only factor driving Thailand’s economic slowdown, the Bank pointed out that the sharp decline in tourist arrivals has multiplied the “Covid devastation” of its economy. Tourist spending accounted for about 11% of Thai GDP in 2019.
According to data from its tourism ministry as well as the World Bank, Thailand had only a little over 34,000 tourist arrivals as of May 2021, compared with over 39 million in 2019, before the pandemic. Fewer tourists also means lower demand for the Thai baht.
Thailand’s over-reliance on tourism is going to be “very challenging” for the country as it seeks to reopen to tourists while still battling the pandemic, Nomura’s Chief ASEAN Economist Euben Paracuelles said last week.
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