Thai Baht Expected to Weaken Amid Dovish Monetary Policy

The Bank of Thailand is expected to maintain a dovish monetary policy to support economic growth, leading analysts to predict a weakening of the Thai baht following a recent rally. The currency strengthened 0.9% this month, but financial institutions including BNP Paribas and MUFG Bank Ltd. forecast a decline toward 33.50 or 34.4 per dollar by the end of the year.

Economic pressure stems from a current account shift to a $17.7 billion deficit last quarter, driven largely by increased energy imports. Kasikornbank research identified this as a twin deficit problem. The central bank is anticipated to hold borrowing costs steady at 1% during its August 26 meeting, which would remain the lowest rate in emerging Asia.

Further downward pressure on the currency is linked to planned $12 billion in new borrowings intended for stimulus and energy transition. These borrowing plans have raised concerns regarding fiscal sustainability and the 70% public debt-to-GDP ceiling.