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Tourist Return to Thailand Taking Advantage of Low Baht

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Tourist Return to Thailand Taking Advantage of Low Baht

Tourists in Thailand are taking advantage of the economic slump that has weakened the Thai Baht to its lowest point in more than five years. Many tourists are traveling to Thailand before the Bank of Thailand hikes rates to curb the baht’s decline.

The Thai Baht has dropped 6% against the greenback this quarter — the worst three-month performance since Covid-19 devastated sentiment in early 2020 — and coincided with the country’s largest current account deficit in nine years and record-low borrowing costs.

In spite of these challenges, the Bank of Thailand’s policy board is turning more hawkish this month and the government is easing restrictions to boost foreign tourism revenue.

With the scrapping of the Thailand Pass, authorities expect about 1.5 million foreign tourists a month for the remainder of this year. This is far better than the merger, 300,000 foreign tourists in April.

The increase in foreign tourists may go a long way to shoring up the downfall of the baht given that the travel-related sector accounted for about a fifth of the nation’s economy prior to the pandemic.

Rate Hikes to Stop Decline of Baht

Moreover, the Bank of Thailand’s reluctance to hike rates has dissipated, with three of its four board members calling for higher borrowing costs on June 8 and policymakers as a whole warning of mounting inflation risks.

However, the central bank’s shift leaves the currency vulnerable to increased Fed hawkishness.

There are other potential headwinds as well. As a net importer of oil, Thailand’s current account balance is under pressure despite recent low crude prices.

Meanwhile, Tourism and Sports Minister Phiphat Ratchakitprakarn said Marijuana legalization may also encourage more tourists to visit Thailand.

With the legalization of cannabis and hemp plants, medical and wellness tourism is expected to gain a boost, with travelers seeking marijuana-infused food and medicinal cannabis treatments expected to come.

According to Phiphat, the nation will consider whether recreational use of cannabis is permitted in time.