Thailand has begun to assess the impact of the shocking decision by Britons to leave the European Union. There will be implications for trade and diplomacy but tourism is expected to be a short-term casualty, officials admit.
The plunge in the value of the pound and the euro following the outcome of Friday's UK referendum on European Union membership is expected to deter Europeans from travelling abroad.
Last year, 5.6 million visitors from Europe travelled to Thailand, accounting for almost 25% of all foreign arrivals, according to the Tourism Department. Travellers from the United Kingdom topped the table from Europe with 946,000 arrivals. The most recent figures show that 81,455 Britons, or 3% of all travellers, visited the country in April of this year.
Tourism Authority of Thailand governor Yuthasak Supasorn said the agency expected a decline in tourists from the UK and Europe, as currency exchange rates tend to be a factor behind the rise or fall of visitors generally.
A study by the TAT showed that when the pound depreciated by 3-10%, visitors to Thailand from the UK dropped between 1% and 5%, the governor said. When the euro was weaker by anywhere from 5% to 20%, the number of overall visitors from the euro zone fell by up to 5%, he added.
Both the pound and euro plummeted after the referendum ended with a win for the voters who wanted to leave the European bloc.
Locally, Bangkok Bank was buying pounds on Friday afternoon at 47.29 baht and selling at 50.42, compared with 51.25 and 52.96 baht on Thursday. Its buying and selling rates for the euro were 38.41 and 40.13 baht, compared with 39.24 and 40.49 baht the day before.
Mr Yuthasak said he expected travellers from Finland, Germany, Italy and Spain to drop by as much as 10%, citing their sensitivity to the situation. Visitors from France and the Netherlands could be affected as well, he added.
But the TAT governor expects the number of tourists from Europe to rebound as early as next month or within three months as currency volatility eases once people have a clearer idea of how the UK and the EU tend to negotiate their divorce.
Market volatility
The Brexit vote also resulted in Thai stocks plunging 1.6% on panic sales as investors sought safe havens including gold. The SET Index closed at 1,413.19 points, down 23.21 points on the day and 0.5% from a week earlier. Trading turnover on Friday was 88.2 billion baht, double the normal daily figure.
The baht fell 0.4% to 35.247 per dollar on Friday morning before ending at 35.28 later in the day.
Securities and Exchange Commission secretary-general Rapee Sujaritkul said he expected only short-term volatility for stocks in Thailand and other regions. Listed companies in Thailand could experience some short-term effects but their fundamentals remained solid, he said.
He called for calm from investors as the process of the UK leaving the European bloc would take about two years.
Somchai Sujjapongse, the permanent secretary for the Finance Ministry, said he foresaw only short-term impacts on the Thai currency and stocks and said the government was well prepared to handle the situation.
Bank of Thailand governor Veerathai Santiprabhob said uncertainty was certain to increase in the global economy as the decision to leave the EU would have impacts on the UK and EU economies.
Commerce Minister Apiradi Tantraporn has ordered trade diplomats based in European capitals to closely monitor the situation but remained upbeat that the country's exports could meet the 5% growth target set by the ministry for the year.
Thailand's trade with the UK accounted only for 2% of total trade. It is not in the top 10 export destinations led by China and the United States.
Firm diplomacy
Foreign Ministry spokesman Sek Wannamethee said Thailand respected the decision of UK voters and was closely monitoring the situation.
Whether the UK was in or out of the EU, Thailand still recognised it as an important strategic partner and close ties between the two countries remained unchanged, he added.
"Our relationship is based on mutual benefits at all levels: governments, the private sector and people," he said.