MAEC GROUP PROJECT. by Ryan Ang

MAEC Group Project TF03, Thailand.

s10164399 — 2015-06-26 08:10:36 UTC

Thai Baht Sinks to Near Six-Year Low as Stocks Erase 2015 Gains

s10164399 — 2015-06-26 08:16:38 UTC

Comments:

s10164399 — 2015-06-26 08:20:14 UTC

http://www.thaiembassy.cz/thailand-in-focus-thai-economy-remains-unaffected-by-mers-fiscal-policy-office-confirms/

s10164399 — 2015-06-26 09:22:48 UTC

Comments

s10164399 — 2015-06-26 09:39:28 UTC

AGREE

s10164399 — 2015-06-26 10:04:55 UTC

DISAGREE

s10164399 — 2015-06-26 10:05:09 UTC

Why did Thai Baht sinks to such a low? Here are some reasons we think might be the cause of it.

s10164399 — 2015-06-30 11:05:11 UTC

From the article,"Thai economic fundamentals are much weaker than neighbouring countries","The central bank’s interest-rate cut and the dollar’s strong outlook have also added to the baht’s weakness." From this article, it mainly cited that due to the fact that Thailand's economic fundamental are much weaker than neighbouring countries and hence, causing it to be in such a bad position. So, what are the fundamentals that we think are the factors that affected it? Well, firstly poor policies. Thailand has very few monetary policies that are actually successful. The prolonged effect of such weak policies led to a very weak consumer confidence and hence, lower GDP. As we learnt from MacroEconomics, the consumption function of the GDP includes: GDP= C+I+G+(X-M) and consumption plays a very important role. Hence. with low consumption, the growth of the country's country will be slow. As a result, this leads to a weaker currency as a currency is usually serve to ''Measure" the size of the economy. Further adding to the problem, political instability is another reason why we think Thai Baht had sunk to such near Six-Year low. With political instability, foreign investors are deterred to invest in Thailand, be it setting up their own companies or investing in Thailand's companies. This causes the country to reduce it's competitiveness in the global markets.Lastly, with the domino effects of a weak currency, this causes even more problems for the country. Investors investing in government bonds and/or stocks will start to withdraw or close their position when a currency weakens to such an extent that it erodes away the profits it had made. As cited from the Article: "The baht’s weakness is also causing concern among some foreign investors” as it reduces the value of their investments in dollar terms, he said." Hence, without more investment in government bonds and/or stocks, this causes the government to have little funding and hence leading to a poorer system and a poorer economy.

To explain another point cited in the article, the article mentioned this sentence:" The central Bank's interest-rate cut and the dollar's strong outlook have also added to the baht's weakness" Firstly, this has caused a decrease in the currency strength because when there is a interest rate cut, this results in higher inflation and hence, weaker currency. Secondly, as a currency is always compared in a pair, the strong dollar outlook has caused Thai Baht to further weaken and hence, reducing it strength. In fact, USD was so strong such that the currency pair "USDJPY" had resulted in a 12-year-high.

Last but not least, Inflation. Inflation is known to be the main "Destroyer" for currency strength because it literally erodes away the currency's purchasing power. To give a clearer picture of what we think inflation does, we created a linkage to how inflation weakens the currency.

High inflation rate--> high interest rate --> less people borrowing --> more people saving than spending -->lower consumption rate-->less demand --> less business --> higher unemployment rate --> weakening GDP -->weakening of currency strength -->hence causing a Six-Years low Thai baht

High Inflation rate---> Erodes Currency Strength---> Causing 6 years low Thai Baht

Hence, this can be another reason why the currency strength has weaken. But based on research, it seems that Inflation was not the main reason in causing the weakening of it as inflation has been in the negative zone.

Upon reading this article, we feel that it is highly impossible for MERS to have no impact on Thailand's Economy at all. Firstly, MERS or Middle East Respiratory syndrome is a deadly virus. It will affect a country economy if it breaks out. This is because it reduces the amount of tourist influx, leading to a decrease in tourist consumption and hence, weakening the tourism sector. This is return causes it to affect Thailand's Economy as 17.1% of Thailand's GDP is contributed by the tourism sector. Hence, when the tourism sector of the country is greatly affect, this will result in a lower GDP and hence a weaker economy. So why will there be a lower tourist influx? This is because tourist are afraid of contracting the deadly disease as well as an outbreak. Travel Agents, World Organizations such as the WHO or World Health Organization will also greatly discourage the visitation to an affected country. Hence, we feel that it is greatly impossible for MERS or any disease to have no impact on Thailand's Economy be it short-term or long-term.

s10164399 — 2015-06-30 11:47:14 UTC

Through the implementation of body scan check-ups at high human traffic area such as airports, hospitals, hotels and shopping centres , we are able to identify and isolate those who are infected. Hence, this allows a lower chance of being in contact with an infected person and in return, reduces chances of an outbreak.At the same time, the promotion of better hygiene regime reduces chances of spreading MERS. As our research stated that only 175 out of 67 million people contracted MERS, the number can be easily contained and monitored. Thus, this reduces the chances of having an outbreak. Despite being more deadly, MERS has a lower transmission rate. Therefore, as the situation is already under controlled, there will be a lesser chance of an outbreak in Thailand. When there is no outbreak, the country economy will not be affected at all.

2015-06-30 12:04:17 UTC

Group members:

s10164399 — 2015-06-30 12:52:27 UTC

Ryan Ang, Woo Siting, Klment sutatio, Nigel Ng, Qian Hui

GROUP MEMBERS:

s10164399 — 2015-06-30 13:01:09 UTC

Ryan Ang, Woo Siting, Klemen sutatio, Nigel Ng, Qian Hui