The continued appreciation of the baht against the US dollar, if left unaddressed, could weaken Thailand’s competitiveness in both tourism and exports relative to its regional peers, cautions SCB EIC, the research centre under Siam Commercial Bank (SCB).
Yunyong Thaicharoen, chief economist at EIC, said the baht’s strength is inconsistent with Thailand’s subdued economic fundamentals, warning that the baht may serve as an amplifier of external shocks, hurting export competitiveness and tourism recovery.
Amid the baht’s appreciation, the Vietnamese dong has depreciated by 3.5% against the dollar year-to-date. This divergence is expected to reduce Thailand’s competitiveness in exports and tourism.
“For example, a Chinese tourist visiting Thailand would face prices of goods and services roughly 4% higher than other destinations. If that tourist were to visit Vietnam instead, they would pay about 6% less on average, based on EIC’s simulator,” Mr Yunyong explained.
EIC projects the baht to strengthen further to 31.50-32 to the dollar this month and to 31-32 year-end.
Year-to-date, the baht has appreciated by 7.6% against the dollar — its strongest level in four years and the highest among regional peers.
This has led to the baht’s trade-weighted index to reach its highest level since the 1997 financial crisis.
The appreciation has been driven by both external and domestic factors, especially the weakening US dollar, higher gold exports amid rising global prices, a current account surplus and capital inflows into the bond market.
According to Mr Yunyong, foreign tourist arrivals remain well below last year’s level, but signs of a recovery are emerging. Chinese arrivals are still down year-on-year, though the contraction is narrowing. Returning tourists, however, are spending more cautiously.
Thailand also faces rising competition for Asian tourists, with overlapping target segments across regional peers. EIC maintains its forecast for international tourist arrivals in 2025 at 32.9 million.
In addition, EIC highlights concerns over the rising unemployment rate, particularly among new graduates, reflecting the impact of sluggish business expansion.
The unemployment rate for those aged 15-24 rose to 18.9% in the second quarter of 2025, up from 16.1% in the previous quarter.
Amid weaker economic growth and sluggish business expansion, employment has continued to slow, impacting the labour market. Businesses prefer hiring experienced workers over new graduates in response to the challenging economic conditions.
“AI disruption is another key factor contributing to the rise in youth unemployment, a trend that has become increasingly evident in the United States,” Mr Yunyong said.
Meanwhile, EIC has trimmed its forecast for GDP growth for 2025 to 1.8% from 2.0% previously, and anticipates a potential decline to 1.5% in 2026.