Strong baht hurting SME exporters

With baht rising in value recently & minimum wages rising, what can the Bank of Thailand do about it?

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Economics

Thirachai: strong baht hurting SMEs

23 Jan 2013
Online Reporters

The ongoing appreciation of the baht has created a problem for small and medium enterprises (SMEs), former finance minister Thirachai Phuvanartnubala said on Wednesday

SMEs had already been affected by the government’s 300-baht daily minimum wage nationwide policy, which took effect on Jan 1, and the stronger baht would worsen the situation, he said.

Mr Thirachai believes the strong baht would become another main risk factor for the Thai economy this year, as it could further trim the country’s exports.

The ex-finance minister is confident that the Bank of Thailand (BoT) is capable of overseeing the value of the baht.

But intervention in the money market to weaken the currency would increase losses to the central bank. Moreover, the intervention could be made only at a certain level, he said.

Regarding a call for the BoT to cut the repurchase rate to curb foreign direct investment inflow, Mr Thirachai said the measure would lead to an expansion in domestic lending.

It could also lead to problems of high inflation and household debts, he added.

(Source: Bangkok Post, Breakingnews, Thirachai: strong baht hurting SMEs, 23 Jan 2013, Online Reporters, link


Exchange Rate Vocabulary

exchange rate - the relation in value between one currency and another; rate of exchange, currency rate อัตราการแลกเปลี่ยนเงินตราระหว่างประเทศ (See Wikipedia)

the baht/US dollar exchange rate

the baht exchange rate against the US dollar

Bank of Thailand (BoT) - Thailand's central bank (See Website)

central bank -
the main bank in a country that controls the supply of money in the country and provides financial services to the government and other banks (See Wikipedia)

monetary policy - the way in which the central bank of a country controls the supply of money and credit (loans) in the economy (See Wikipedia)

currency - a widely used the money accepted for exchange of goods in an economy เงินตรา (See Wikipedia)
currency appreciation - when a country's currency becomes more valuable compared to the currencies of other countries (which makes goods exported from the country more expensive)

strong baht - strong exchange rate, when the baht is more expensive compared to other currencies making Thai exports more expensive and hurting Thai competitiveness in international export markets

Thirachai: strong baht hurting SMEs
the stronger baht would worsen the situation

ongoing - continuing; currently happening; happening at the present moment อย่างต่อเนื่อง ไม่หยุดยั้ง
ongoing appreciation of the baht

enterprises - companies
small and medium enterprises (SMEs)

The ongoing appreciation of the baht has created a problem for small and medium enterprises (SMEs)

finance - to provide money for something จัดหาเงินทุนให้

ministry -
one of the big departments in the government กระทรวง
finance ministry -
the part of the government that handles getting money for government activities through loans or taxes and budgeting government spending  กระทรวงการคลัง

minister -
the high-level government official in charge of a ministry รัฐมนตรี
finance minister
- the high-level government official in charge of the Finance Ministry

former - a person who was in a position before, in the past
former finance minister
former finance minister Thirachai Phuvanartnubala

ex-
- Same as "former"
ex-finance minister

wage - an amount of money that you earn for working, usually according to how many hours or days you work each week or month ค่าจ้าง
minimum wage - the lowest amount of money that can legally be paid to a worker for their work

daily minimum wage -
the lowest legal wage for one day of work
300-baht daily minimum wage - a law that says that 300 baht is the lowest legal wage (less than this is breaking the law)

nationwide - throughout a whole country ทั่วทั้งประเทศ ทั่วประเทศ
policy - a plan of action to guide decisions and achieve outcomes นโยบาย (See Wikipedia)
nationwide policy - a policy all over a country

SMEs had already been affected by the government’s 300-baht daily minimum wage nationwide policy, which took effect on Jan 1

risk - a danger; the possibility that something dangerous or unpleasant might happen ความเสี่ยง
factor - a fact or situation which influences the result of something ปัจจัย
risk factor - something that causes danger when it happens

trim - cut by a small amount ตัดบาง
trim exports - decrease exports by a small amount

could further trim the country’s exports
the strong baht would become another main risk factor for the Thai economy this year, as it could further trim the country’s exports.

overseeing - managing, checking to see that it operates properly and nothing goes wrong
overseeing the value of the baht

capable - able to do something; very good at a job มีความสามารถ
capable of overseeing the value of the baht.

confident - being certain of your abilities or of having trust in people, plans, or the future มั่นใจ
The ex-finance minister is confident that the Bank of Thailand (BoT) is capable of overseeing the value of the baht.

intervention - becoming involved in a situation and trying to change it การแทรกแซง
central bank intervention - when the central bank buys and sells in foreign currency markets to influence the baht exchange rate

But intervention in the money market to weaken the currency would increase losses to the central bank. Moreover, the intervention could be made only at a certain level, he said.

repurchase rate - the policy interest rate; the interest rate that the central bank uses in its monetary policy with banks to control the supply of credit (loans) and money in the economy (bilateral repurchase operations temporarily inject and absorb liquidity), also called "repo rate" (See Bank of Thailand pages: #1 & #2 & #3)

repo rate - "the discount rate at which a central bank repurchases government securities from the commercial banks, depending on the level of money supply it decides to maintain in the country's monetary system. To temporarily expand the money supply, the central bank decreases repo rates (so that banks can swap their holdings of government securities for cash). To contract the money supply it increases the repo rates" (See Business Dictionary)
 
cut the repurchase rate - decrease the policy interest rate to make it less expensive and easier to borrow money

Foreign Direct Investment (FDI) - money that people or companies of one country invest in another by buying property, building factories, buying businesses, etc (See Wikipedia)

investment
- taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)
direct
investment - Same as "foreign direct investment" 

inflow -
the amount of something coming into a place
direct
investment inflow - the amount of investment money coming into a country (from outside the country)

curb - stop or reduce something ลดหรือยุติ ระงับ ควบคุม
curb foreign direct investment inflow

domestic - inside the country; within the country ภายในประเทศ
lending - giving money to someone who agrees to pay it back in the future การให้ยืม
domestic lending - when banks give loans to people inside the country

expansion - when something increases in size, number or importance การขยายออก
expansion in domestic lending.

measure - an action taken to solve a particular problem มาตรการ
measure would lead to an expansion in domestic lending.

Regarding a call for the BoT to cut the repurchase rate to curb foreign direct investment inflow, Mr Thirachai said the measure would lead to an expansion in domestic lending.

inflation - the level of prices rising in the economy as a whole ภาวะเงินเฟ้อ

household - a group of people, often a family, who live together ครัวเรือน
debt - money that someone has borrowed but not paid back yet  หนี้, หนี้สิน
household debts

it could lead to problems of high inflation and household debts

About the author

columnist
Writer: Jon Fernquest
Position: Online Writer