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3 Oct 2022

Econ Digest

The Baht weakens on risk of global recession. How does it affect the Thai business sector?

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        KResearch views that the increasing risk of global recession, especially in the U.S. and Europe, will affect the export sector, while most of Thailand’s sectors may not fully benefit from the weakening Baht. Taking the tourism sector as an example, although tourists can exchange for more Baht, other currencies are weakening as well; moreover the Baht is appreciating against several currencies such as the Euro, the Pound Sterling and the Yen. Therefore, tourism-related businesses such as hotels may not benefit as fully as expected from the depreciation of the Baht.

        At the same time, the depreciation of the Baht also affects the cost of imports, and industries that heavily rely on raw material imports and mainly focus on sales in the domestic market will be greatly affected by the weakening of the Baht. KResearch projects that a 10-15% depreciation of the Baht will result in an average increase in import costs for the industrial sector of around 2.2% (while the import volumes remain constant). Recently and going forward, businesses still face various cost increases amid revenue uncertainty from both international and domestic markets. As a result, Thailand’s industrial sector still faces many challenges during the remainder of the year and next year.      

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