The baht could slide to 37 to the dollar later this year as a weakening Thai economy and a delay in US interest rate cuts pressure the Thai currency, says Kasikorn Research Center (K-Research).
Kanjana Chockpisansin, head of research, banking and financial sector at the think tank, said recent data from the National Economic and Social Development Council (NESDC) is the main reason causing the baht to depreciate more than other regional currencies against the dollar.
"The baht traded at 36.10-12 to the greenback on Tuesday morning, compared with Monday's and last week's close of 36.02 baht to the dollar," she said.
The NESDC revealed on Monday the economy expanded by only 1.7% year-on-year in the fourth quarter of 2023, less than projected, and declined 0.6 percentage points from the previous quarter. The government planning unit slashed its figure for 2023 GDP growth to 1.9% from 2.5%, while the outlook for 2024 was downgraded to 2.2-3.2%, from its forecast in November of 2.7%-3.7%.
The decreases prompted K-Research to slash its GDP growth estimate for this year to 2.6% from 3.1%, as private consumption is expected to slow as government stimulus has ended.
The baht has depreciated 5.5% this year to date, ranking second among regional peers, while the Japanese yen has weakened by 6.1%. The US dollar index has gained 3%.
"The Federal Reserve is likely to start cutting the policy rate in June, later than previous market forecasts. Coupled with weakening Thai economic data, these two factors could pressure the baht to decline, possibly reaching 37 to the dollar later this year," said Ms Kanjana.
SCB Financial Markets anticipates the baht to move in a range of 36.05-25 on softer Thai economic data, while Prime Minister Srettha Thavisin called on the Bank of Thailand to have an urgent special meeting to cut interest rates.
Ms Kanjana said factors to monitor are foreign fund flows and the move by the People's Bank of China (PBOC) to cut the five-year loan prime rate (LPR) by 25 basis points to 3.95% yesterday, the first cut in eight months, in an effort to stimulate the economy.
"The market earlier anticipated the PBOC would lower both the 5- and 10-year LPRs, but it cut only the 5-year rate, thus the impact has been minimal so far," she said.