Strong Thai Baht Raises Concerns Over Competitiveness as Economy Faces Mixed Signals
Despite economic headwinds, the baht’s sustained appreciation is benefiting importers but weighing on exports, tourism and broader economic momentum
Thailand’s currency, the baht, has strengthened markedly over the past year, emerging as one of Asia’s best-performing currencies even as the country’s economic growth remains modest, prompting debate about its impacts on the economy.
The baht appreciated significantly against the U.S. dollar in 2025, driven in part by external factors such as a weakening dollar and capital inflows, alongside domestic stability, but this trend has posed challenges for key export-oriented and tourism sectors.
A stronger baht makes imported goods and services less expensive for Thai businesses and consumers, effectively lowering costs for companies that rely on foreign inputs and reducing inflationary pressures.
However, this currency strength can also reduce the competitiveness of Thai exporters by making their goods more expensive in foreign markets, a concern echoed by industry associations and exporters who say that recent gains have eroded price competitiveness and compressed revenues when converted into baht.
Tourism operators have similarly voiced concerns that a strong baht raises the cost of travel for foreign visitors, potentially dampening spending and reducing the appeal of Thailand relative to regional competitors whose currencies have not appreciated as sharply.
The revenue impact is especially salient given tourism’s importance to the national economy.
Policymakers acknowledge the nuanced effects of the currency’s strength.
While a robust baht can reflect investor confidence and contribute to macroeconomic stability, excessively rapid or persistent appreciation can complicate the central bank’s efforts to support growth and maintain external sector dynamism.
The Bank of Thailand has at times intervened to moderate volatility and signal its attentiveness to exchange rate risks.
Economists note that the baht’s recent behaviour—strengthening in contrast to regional peers—mirrors broader shifts in global capital flows and expectations around U.S. monetary policy, but they caution that the structural implications for Thailand’s competitive position in exports and tourism warrant careful policy calibration.
As the country seeks to balance price stability with export competitiveness, the strong baht underscores the complex interplay between exchange rates and economic performance in an interconnected global market.
The baht appreciated significantly against the U.S. dollar in 2025, driven in part by external factors such as a weakening dollar and capital inflows, alongside domestic stability, but this trend has posed challenges for key export-oriented and tourism sectors.
A stronger baht makes imported goods and services less expensive for Thai businesses and consumers, effectively lowering costs for companies that rely on foreign inputs and reducing inflationary pressures.
However, this currency strength can also reduce the competitiveness of Thai exporters by making their goods more expensive in foreign markets, a concern echoed by industry associations and exporters who say that recent gains have eroded price competitiveness and compressed revenues when converted into baht.
Tourism operators have similarly voiced concerns that a strong baht raises the cost of travel for foreign visitors, potentially dampening spending and reducing the appeal of Thailand relative to regional competitors whose currencies have not appreciated as sharply.
The revenue impact is especially salient given tourism’s importance to the national economy.
Policymakers acknowledge the nuanced effects of the currency’s strength.
While a robust baht can reflect investor confidence and contribute to macroeconomic stability, excessively rapid or persistent appreciation can complicate the central bank’s efforts to support growth and maintain external sector dynamism.
The Bank of Thailand has at times intervened to moderate volatility and signal its attentiveness to exchange rate risks.
Economists note that the baht’s recent behaviour—strengthening in contrast to regional peers—mirrors broader shifts in global capital flows and expectations around U.S. monetary policy, but they caution that the structural implications for Thailand’s competitive position in exports and tourism warrant careful policy calibration.
As the country seeks to balance price stability with export competitiveness, the strong baht underscores the complex interplay between exchange rates and economic performance in an interconnected global market.
