กกร. ห่วงบาทแข็งกระทบส่งออก วอน ธปท. เร่งปรับลดดอกเบี้ยJCC Concerned About the Strengthening Baht Impacting Exports, Urges BoT to Accelerate Interest Rate Cuts

On Wednesday, October 2, 2024, Mr. Sanan Angubolkul, Chairman of the Thai Chamber of Commerce, presided over a meeting of the Joint Committee of the Private Sector (JCC) with Mr. Kriangkrai Tiranukool, Chairman of the Federation of Thai Industries (FTI), and Mr. Payong Srivanich, Chairman of the Thai Bankers' Association, present for the press briefing.

The global economic slowdown has become more pronounced, with the PMI Manufacturing index for September in the U.S., Europe, China, and Japan declining significantly. This has prompted several countries to stimulate their economies, as the U.S. Federal Reserve has already decreased the policy interest rate by 0.5%, and additional rate cuts may occur in the remaining months of the year. Similarly, the People’s Bank of China has also lowered interest rates, alongside government measures to stimulate the economy anew to support production and consumer spending, which are trending weaker.

The rapid strengthening of the Thai baht has increased pressure on the export sector. The Thai baht appreciated from 36.8 to 32.3 baht per U.S. dollar over the past three months, or approximately 12%, marking a stronger rise than other regional currencies. This has become a negative factor for competitiveness, especially for agricultural and food products that primarily use local raw materials. Furthermore, if the Thai baht continues to strengthen in the remaining months of the year, it may impact exporters' revenues in baht by approximately 180-250 billion baht.

It is also necessary to monitor the effects of flooding on economic activities, alongside the potential continuation of new storms entering Thailand in the fourth quarter of 2024. It is anticipated that the current flooding will result in damages amounting to about 30-50 billion baht or approximately 0.2% of GDP, with the agricultural sector being the most affected due to the possibility of expanding flooding. It is estimated that Thailand's economy in 2024 will still grow within a range of 2.2% to 2.7%, supported by government initiatives to stimulate the economy and expedite budget disbursements for investments, along with assistance for those affected, including relief measures and liquidity-boosting strategies approved by the Cabinet on October 1. Additionally, the government is tasked with integrating the development of a real-time water level and flood risk notification system for citizens and businesses, in cooperation with neighboring countries to accelerate the resolution of encroachment issues for agricultural purposes both in Thailand and with neighboring countries, which will help increase upstream areas to prevent sudden flooding and mudslides.

The JCC's economic outlook for 2024
(as of August 2024) 2024
GDP: 2.2 to 2.7
Exports: 0.8 to 1.5
Inflation: 0.5 to 1.0

(as of September 2024) 2024
GDP: 2.2 to 2.7
Exports: 1.5 to 2.5
Inflation: 0.5 to 1.0

(as of October 2024) 2024
GDP: 2.2 to 2.7
Exports: 1.5 to 2.5
Inflation: 0.5 to 1.0

The JCC meeting expressed concerns regarding the rapidly strengthening Thai baht, which has risen above the 34.0-34.5 baht per dollar level, a rate at which businesses can remain competitive. They emphasized the importance of managing the exchange rate to prevent excessive strengthening or volatility, alongside proactive communication to allow businesses to adapt in a timely manner. It is also essential to systematically pass on the benefits of a stronger baht, such as reduced costs of imported energy and raw materials, particularly in the agricultural sector, to the manufacturing sector and the populace. They proposed that the Bank of Thailand expedite its consideration of interest rate adjustments already reflected in the forward market, where the market currently anticipates a policy rate reduction of at least 0.25% within this year and an additional 0.25%-0.5% next year, which would swiftly mitigate impacts on the real sector, while also reviewing the inflation target framework currently under discussion with the Ministry of Finance to align it appropriately with the nation's current and future economic contexts.

The JCC meeting also reviewed proposals for the National Power Development Plan (PDP2024) to maintain the country’s competitiveness and energy stability, which includes 6 proposals as follows:

1) Increase the proportion of electricity generation from renewable energy to align with the long-term greenhouse gas reduction strategy (LT-LEDS) in order to achieve Thailand's Carbon Neutrality and Net Zero goals.
2) Increase the share of solar and wind energy alongside battery energy storage systems (BESS). During the transition period, efforts should be made to reduce reliance on energy imports by accelerating the development of energy sources from the Thailand-Cambodia area.
3) Foster cooperation between the public and private sectors to consider procuring new alternative energy sources in appropriate proportions, such as hydrogen and small modular reactors (SMRs), and the use of renewable energies alongside energy storage systems.
4) Urgently prioritize electricity liberalization by accelerating the implementation of third-party access (TPA) to the electricity grid by 2026, and clearly define the roadmap for liberalization in the PDP 2024, which involves developing smart grid systems and promoting energy storage technology, as well as comprehensive management of used batteries.
5) Evaluate the economic viability and necessity of establishing new power plants compared to the options of repowering or overhauling existing plants, and set criteria based on Loss of Load Expectation (LOLE) indicators, ensuring that Reserve Margin information is provided alongside.
6) Propose the establishment of a joint committee comprising public and private sectors to address energy issues (Energy Task Force), allowing private sectors to provide input and suggestions to the public sector regarding policy proposals and management plans for the country’s energy development to the National Energy Policy Committee (NEPC).