July 2, 2022 is the 25th anniversary that the Thai government announced.Floating the bahtin 1997 and switched to a managed floating exchange rate system (Managed Float Exchange Rate Regime). This is a major turning point in Thailand’s exchange rate policy.
From the former using the exchange rate policy tied to the money basket. (Makes the currency inconsistent with the real economic basis causing an attack on the baht) to an organized float This allows the movement of the baht to be flexible. more in line with the fundamentals of the Thai economy
The current baht is affected by the dollar factor.
The baht this year is depreciating. Compliant with many Asian currencies All of which are affected by the dollar factor. especially the accelerating interest rate of the US Federal Reserve while the market forecast view reflects that with the constraints that the economy has not fully recovered
Thus, even though the central banks of these Asian countries started a cycle of rising interest rates. But the pace of interest rate hikes will still be somewhat behind the US interest rate. In comparison, it is found that the current situation is different from 1997 because in 1997 the depreciation of the baht was a result of the depreciation after the currency floated to reflect the weak fundamentals of Thailand in the that time
In addition, if looking at the volatility of the currency, it is found that although the picture of the outflow of investments in the stock market and the Thai bond market after the US accelerating interest rates But the volatility of the baht in 2022 is still at a level similar to that of other Asian currencies. which has a volatility of about 4-6%
It reflects that the Bank of Thailand will continue to help monitor movements and reduce volatility.bahtamid uncertain factors surrounding especially the timing of the US interest rate hike. global economic risks Concerns about inflation and oil prices as well as the current account balance situation The direction of capital flows in the financial markets and the recovery trend of the Thai economy However, entrepreneurs in the business sector should also choose suitable tools to help manage their currency risk as well.
The 1997 financial crisis originated from internal imbalances and currency binding. But the current Thai economic situation is different. because it has to deal with the impact of external factors mainly
by year 2540 The Thai economy has many imbalance problems. The private sector and financial institutions lack awareness of risks. Excess spending and borrowing opens up risk of maturity and currency mismatch. High foreign debt. And there is widespread speculation in the real estate market. The overall economy has a chronic current account deficit problem. while the exchange rate is pegged to the basket of money. which made the currency attack And the Thai authorities need to use international reserves to maintain the stability of the baht. by that time Net international reserves fell to only 2.8 billion baht as of June 1997.
Looking back at the current situation A noticeable change is the fact that international reserves are much higher and stronger than in the past. The current level of net international reserves (reserves and net forward positions) of Thailand is approximately 251 billion baht as of June 24, 2022, which can support short-term foreign debt, 3 months of imports and support the Print banknotes in full
Meanwhile, the external debt ratio fell to 38.2% to GDP at the end of 2021. In addition, the authorities periodically took care of speculation in the real estate market through measures such as the setting of LTV criteria, thereby reducing some concerns about the problem. which these pictures reflect the lessons learned from the past and the way to prevent Thailand from repeating the same
However, it must be admitted that The current economic situation in Thailand has problems from external factors. which is not the same as in the past Currently, the source of the problem is from Covid-19. The Ukrainian-Russia war that affected oil prices including the US interest rate hike This results in both immediate issues and structural problems that still need to be pursued.
- foreign debt Lessons from the past reflect that the issue that needs to be cautious is the volatility of the baht’s depreciation that will increase the debt burden. And when looking at only the short-term foreign debt with outstanding balance of 74.2 billion US dollars, it was found that about 58.8 percent or 43.7 billion US dollars. indebted to the business sector Therefore, foreign exchange risk must be managed in a way that is suitable for each individual’s income and expenditure flows in foreign currencies.
- Household, business and government debt rose. when combined accounted for 228.4% of GDP. (90% household debt, 78.8% business debt, and 59.6% public debt/GDP), which was higher than 149.8%/GDP in 1997. However, the situation today is different and has reasons that are not the same as during the period. Crisis of 1997. In 1997, the source of the problem came from incurring foreign debt and borrowing through the BIBF. while the current situation Most of the private and public debts are debt denominated in Thai Baht mainly due to domestic liquidity.
In addition, it must be admitted that Part of the reason for the increase in debt for both the public and private sectors is due to the need to Faced with multiple crises over the years Therefore, despite the rising debt problem in the past especially in the household sector It will be a long-term problem that needs to be taken care of. But it is unlikely to create short-term problems like the BIBF debt during the 1997 crisis.
• Looking deeper into the dimensions of the economy, it is found that the current Thai economy has limitations in terms of income growth going forward. The economy is highly dependent on tourism and related services. Therefore, although Thailand began to open the country But the recovery is not thorough and depends on the conditions controlling the situation of the disease. making the ability to earn
Especially of SMEs and small people have not returned to normal. In addition, revenue growth going forward will be constrained by labor skill issues. Competitiveness of small and medium businesses Restructuring into the business of the future which is still in progress. But Thailand faces a rapidly changing global trade field. and stepping into an aging society This will further exacerbate the problem of labor shortage and burden on public health in the long run.
Thai banks today are in a stronger position than in 1997, but are struggling to bring profitability back to pre-Covid levels, while addressing the problem of non-performing loans. and expediting long-term debt restructuring for debtors
Weaknesses in the banking sector that triggered the 1997 financial crisis have been steadily resolved over the years. especially in the story Integrated risk management and cover risks that may arise in the future
including supervision of financial institutions in accordance with international standards (Basel III), making the current Thai banking system It is much stronger than in 1997, reflecting the stability of the capital fund level and high liquidity. including proactively managing bad debt problems The capital adequacy ratio stood at 19.79% (as of April 2022), which is higher than in 1997. The loan-to-deposit ratio was below 100% and the 1Q22 NPL ratio was 2.93% to total loans. of the commercial banking system
However, revenue support from the main business of commercial banks in the slow economic environment It’s still a challenging situation. while on the other side Commercial banks also have a mission to take care of debtors. (As of April 2022, there are approximately 12.1% of debtors under the bailout measures.) and expedite debt restructuring especially in vulnerable groups in order to make the debt repayment burden suitable for the debtor’s potential and ability to earn income in the long term
In conclusion, Kasikorn Research Center views that from various economic and financial issues referred to in the comparison above, reflecting that The problems of the Thai economy today are not the same as they were in 1997. And Thailand has learned and adjusted measures and rules to prevent repetitions. until making it stronger in many areas, such as the level of international reserves financial institution status And there is no broad speculation like in 1997.
However, from the effects of external factors the whole covid crisis Ukrainian-Russian War high oil price problem and the US interest rate hike The important issue is to help the households and businesses to cope with immediate problems. such as inflation pressures cost of living/high cost and interest rates in the country that are going to increase
Along with laying out a way to deal with structural problems both rising debt levels upgrading of labor skills Stepping into an aging society and accelerate the economic restructuring to occur quickly to reduce the barriers that limit future economic growth and income
