BANGKOK, THAILAND – Thailand’s powerful export lobby warned that a surging baht had become a direct threat to the country’s industrial base and employment, urging authorities to intervene without delay.
Export council warns of eroding competitiveness
The head of the Thai National Shippers’ Council (TNSC), Thanakorn Kasetsuwan, cautioned that the currency’s sharp appreciation was squeezing manufacturers.
“The strong and extremely volatile baht is a huge problem for manufacturers and exporters.”
said Thanakorn Kasetsuwan, chairman of the Thai National Shippers’ Council.
Thailand’s currency had strengthened more than those of regional rivals Vietnam, Indonesia and Malaysia, stripping Thai products of their price advantage on global markets. As a result, orders were falling, production was being cut back and jobs were at risk.
Speculative inflows blamed for baht surge
According to the TNSC, speculative capital inflows were the main driver of the baht’s strength. Short-term financial transactions, often referred to as hot money, were pushing the currency higher.
This capital did not create real investment or jobs but instead made the baht unnaturally strong and unpredictable, hollowing out the foundations of the real economy.
“The exchange rate development no longer reflects the fundamentals.”
said the council.
Soaring hedging costs squeeze smaller exporters
For medium-sized exporters, the situation had become existential as the cost of hedging against currency swings had soared. What was meant to be protection had turned into an additional financial burden.
Many small and medium-sized enterprises (SMEs) could barely afford such protection and were forced to carry the full currency risk. They faced a major disadvantage in international competition.
Shippers’ council sets out four-point rescue plan
The TNSC presented a four-point emergency package to the government. First, the baht should be kept artificially competitive against regional rival currencies.
Second, speculative capital flows should be curbed through minimum holding periods or taxes. Third, the monetary policy of the Bank of Thailand should put the interests of the real economy first.
Fourth, the cost of currency hedging should be drastically reduced, especially for SMEs. The council argued that without relief, many smaller firms could not survive prolonged volatility.
Call to treat exchange rate as strategic pillar
The shippers’ council appealed to the government to treat the exchange rate as a strategic pillar of economic policy, stressing the importance of protecting Thailand’s industrial core.
“A stable and competitive baht is not market interference, but the protection of our production base, our exports and our jobs.”
said the council.
It warned that time was running out and that every day of an overvalued baht cost Thai companies contracts to cheaper competitors. The debate over the currency would determine whether Thailand’s industrial base could be preserved.
Pressure mounts on Bank of Thailand and government
Responsibility now lay with the Bank of Thailand and the government, which faced calls to step into the foreign exchange market. Observers noted that such a move would be bold and closely watched internationally.
However, the alternative could be a severe export crisis with wide social consequences. The eventual decision would signal how highly policymakers valued domestic industry.
Tourism benefits and risks from strong currency
While exporters struggled, parts of the tourism sector initially benefitted from cheaper imports of goods and services. Yet the strong baht also had a darker side for tourism.
Thailand had become noticeably more expensive for international visitors, as a stronger baht meant higher costs for accommodation, restaurants and activities once foreign currencies were exchanged. Neighbouring countries such as Vietnam and Cambodia were becoming more attractive as budget destinations, raising the risk that Thailand could lose market share in price-sensitive segments.
Fed policy seen as key driver for 2026
A crucial factor for the baht’s trajectory in 2026 would be interest rate policy at the US Federal Reserve. After years of rate hikes, the Fed faced important strategic choices.
Further rate cuts could weaken the US dollar and strengthen Asian currencies like the baht, while renewed hikes would likely pull capital back into dollar assets and ease pressure on the Thai currency. The Bank of Thailand was closely tracking these developments, as the rate differential between Thailand and the United States largely determined capital flows.
China slowdown casts a long shadow
China, Thailand’s largest trading partner, was experiencing persistent economic weakness, from a property crisis to falling exports and weak consumer confidence. This downturn was weighing on the entire region.
A deeper Chinese slowdown would directly hit demand for Thai products. At the same time, Chinese capital flight and yuan depreciation could perversely strengthen the baht if investors sought regional safe havens, leaving Thailand caught between export demand and currency stability.
Border tensions with Cambodia seen as hidden risk
Smouldering border tensions between Thailand and Cambodia over disputed temple sites and territories had so far been largely ignored by currency specialists as a risk factor. Analysts in the report warned that this might be a mistake.
If the conflict escalated into military confrontation, the investment climate in the entire region could deteriorate sharply, with foreign capital leaving, tourists cancelling trips and trade routes disrupted. Such a scenario would likely put depreciation pressure on the baht, offering exporters short-term relief but at the cost of political instability and higher risk premiums.
Taiwan crisis viewed as worst-case scenario
A military conflict between China and Taiwan was described as a worst-case scenario for Southeast Asia’s economies. Thailand, as part of regional supply chains, would be hit hard.
The Taiwan Strait is one of the world’s most important trade routes, and any blockade or conflict would severely disrupt global trade and push the region into deep recession. For the baht, a Taiwan crisis would probably trigger an initial plunge as capital fled the region and export markets collapsed.
Supply chain collapse and extreme volatility
In the event of a Taiwan crisis, Southeast Asia’s tightly integrated supply chains could collapse within days. Thailand is heavily dependent on electronic components and semiconductors from Taiwan.
The automotive, electronics and machinery sectors would grind to a halt without Taiwanese inputs, with export earnings potentially falling by an estimated 30 to 40 percent. Such a shock would send the baht into extreme volatility and force the Bank of Thailand to consider managing a plunging, rather than an overly strong, currency.
Capital flight to Singapore and Hong Kong
In a regional crisis, capital would likely flow out of Thailand into financial hubs such as Singapore and Hong Kong, which are viewed as safer havens with more stable political frameworks and deeper capital markets. Their currencies, the Singapore dollar and the Hong Kong dollar, would probably remain relatively stable or even benefit.
Thailand would then face both a weaker baht and capital flight that could destabilise its banking system. Defending the currency would require the use of foreign exchange reserves, undermining the country’s financial resilience.
Commodity prices as a 2026 wildcard
Global commodity prices in 2026 were highlighted as an underestimated variable for the baht. Thailand is a net importer of energy, particularly oil and gas.
Rising oil prices would worsen the trade balance and weaken the currency, while falling prices could have the opposite effect and intensify appreciation pressures. At the same time, Thailand is a major exporter of agricultural products such as rice, rubber and sugar, making rural incomes and export earnings sensitive to price swings.
Digital baht could tighten capital controls
The Bank of Thailand was working on a central bank digital currency, the digital baht, which could reach a decisive stage in 2026 and offer new tools for managing the currency. A digital baht would in theory allow more precise control of capital flows.
Speculative transactions could be more easily identified and restricted. However, the report warned that overly strict controls could damage Thailand’s reputation as an open market economy and deter long-term foreign direct investment, making the balance between control and openness a delicate task.
Demographic shift seen as long-term currency driver
Thailand’s rapid demographic change was identified as a long-term factor behind currency strength. The society is ageing quickly, and the working-age population is already shrinking.
An ageing population tends to save more and consume less, leading to current account surpluses and a stronger baht, even as productivity and innovation decline. Over time, Thailand could resemble Japan, with a structurally strong currency but weak growth, turning today’s export strains into a chronic condition.
Strong baht: sign of strength or dangerous illusion?
The report concluded that a hard currency might signal stability but could quickly become a disadvantage when exports turned more expensive and regional competitors undercut Thai prices. It posed the question of whether market forces alone should set the exchange rate or whether Thailand needed a more active currency policy to protect jobs and production.
The answer, it argued, would determine whether Thailand emerged from the current currency turmoil in 2026 as a strengthened industrial nation or a weakened one.