Deputy Prime Minister and economy tsar Somkid Jatusripitak, seen here at the October White House meeting, denies Thailand is intervening in currency markets to weaken the baht. (Photo courtesy Government House)
Deputy Prime Minister Somkid Jatusripitak is playing down warnings from some foreign research houses that Thailand risks being added to the US Treasury’s watch list of potential currency manipulators, saying the government has no immediate plans to step in and curb the stronger baht.
The country’s massive foreign reserves are due to a trade surplus and capital influx, he said.
“The Bank of Thailand is responsible for keeping the currency stable, but there has been no intervention,” Mr Somkid said. “The baht is moving in line with market forces, while the stock market has improved thanks to fund inflows as investors consider the currency a safe haven. Weakening the baht is not a consideration today.”
The central bank reported that Thailand’s foreign reserves amounted to US$202.8 billion (6.54 trillion baht) as of Dec 22, up considerably from $171.9 billion at the end of 2016.
- Earlier report: US suspects currency-market intervention
Mr Somkid said the baht would be less strong if the government had a policy of intervention.
The baht, which surged almost 10% against the greenback last year, was the second-best-performing currency in Asia after the South Korean won.
The local currency is the biggest gainer in the region this year, up about 1% versus the dollar.
Mr Somkid’s comments came after Bloomberg reported that Thailand and India are at risk of being included in the US watch list of potential currency manipulators.
Bloomberg referred to a Bank of Tokyo-Mitsubishi note on Dec 26 that Thailand’s trade surplus with the US was $16.7 billion at the end of October, according to US Census Bureau data, and that its current account surplus has been more than 10% of GDP for the six quarters through September.
The nation has passed the 2% intervention threshold and is one of 16 countries cited by the US as running high trade surpluses with the latter.
The US Treasury’s three criteria for countries to be added to the monitoring list are a trade surplus with the US of $20 billion or more, a current account surplus of at least 3% of GDP, and net buying of foreign currencies amounting to at least 2% of GDP over a 12-month period.
China and South Korea were the only two emerging markets on the list at the last semi-annual report in October, while Taiwan was removed.
Mr Somkid said the key thing is that small and medium-sized enterprises (SMEs) must hedge against foreign currency risks, a measure that incurs some costs but is considered an investment.
In the meantime, the government has set its sights on a major overhaul of the agricultural production structure this year in an effort to add another driver for the economy to reach its growth potential, Mr Somkid said.
The revamp will focus on potentially competitive crops, reducing growth of those with gloomy prospects and helping farmers who can lead the shift, he said.
If 20 million rice growers and an additional 10 rubber farmers have higher income, the country’s economy will be stronger, according to Mr Somkid.
Marketing will play a leading role in farm production, he said, while the Science Ministry must prepare to adopt appropriate technology for the farming sector.
Mr Somkid said farmers can change their production behaviour and move towards quality products that meet market demand.
The change in the agricultural sector is expected to be seen in the next 3-4 years, he said.
“Should the country fail to catch up with the change in technology, we will go down in the league table,” Mr Somkid said. “If the agricultural sector cannot adapt to change, our society will fall into ruin.”