The baht depreciated against the US dollar at a faster pace than its regional peers in Asia over the past two months, weighed down by external uncertainties, and its downward trend is expected to continue, says a senior central bank official.
Offshore fund outflows resulted from the more hawkish stance than expected of the US Federal Reserve, dividend repatriation of multinational companies and the Sino-US trade spat contributing to the baht's weakness, said Don Nakornthab, the Bank of Thailand's senior director of the economic and policy department.
The baht and the South Korean won were the best-performing currencies in Asia last year, but they fell 3% versus the greenback from the end of May to June 22.
The baht's volatility -- a 6.2% drop between the beginning of this year and June 22 -- was in line with the region's showing.
The baht on Friday weakened to 33.19 to the dollar from 33.12 on Thursday. Year-to-date, the baht dropped 1.8%, outperforming the won, which lost 4.5%, the Indonesian rupiah (down 5.7%), the Philippine peso (down 6.5%) and the Indian rupee (down 7.2%).
Based on the baht's downward trend, the country's international reserves could decline to 3.4 times short-term debt from 3.5 times in May, but the level is still considered high enough to provide a cushion against any shocks, Mr Don said.
Thailand's international reserves fell to US$209.7 billion (6.9 trillion baht) as of June 22 from $211.5 billion a week ago and $212.3 billion as of June 8.
According to Bank of Thailand data, its foreign portfolio showed a net outflow of $1.85 billion in May, up from $1.37 billion in April, cashing a net of $4.1 billion from Thailand year to date. Of the total $1.85 billion, $1.67 billion was pulled out of the stock market and the remainder from bonds.
Mr Don said the baht's retreat could hurt the country's imports, particularly in capital goods, machinery and equipment products, while private investment remains promising, with capacity utilisation at 69.4% in May, reaching the highest level since September 2017.
The baht's depreciation could also benefit the country's exports.
The central bank forecasts double-digit growth for the first half of the year. The country's outbound shipments surged 11.3% for the first five months, while growing 13.1% in May.
The Commerce Ministry and the Bank of Thailand use a different base for export and import data. The former uses customs-cleared figures, while the latter uses payment-based numbers.
"The export growth rate is expected to moderate in the second half because of the high-base effect," Mr Don said. "Even if there is no trade war, global trade will slow down from the latter half, in line with the global economic outlook."
The central bank said the country's economic outlook and monetary conditions continued to gain traction in May, thanks to strong exports and domestic demand.
Merchandise exports expanded on the back of strong external demand and a rise in global crude oil prices, while domestic demand expanded robustly.
The expansion in external and domestic demand was attributed to the growth in manufacturing. Robust growth was also spotted in public spending and private investment, while the tourism sector continued to grow.