The Thai baht has been one of the top-performing currencies amongst emerging countries in Asia. The baht surged to 8.3% versus the dollar last year, and has seen the best growth globally in 2019. Given the incessant strengthening of the currency and Thailand’s strong economy backed by current account surpluses, many investors view it as an upcoming financial and FinTech safe haven amidst the global trade war, putting the currency up against the Japanese yen – the go-to safe haven.
Despite its strong economy, Thailand is not immune to the effects of the exacerbating global trade war. Trade tensions and economic slowdowns have contributed to the country’s economic decline, resulting in the baht’s weakest growth in five years. However, the developing country’s financial resilience and policy pliancy rapidly prompted Thai government officials to review and rehaul their trade policies. Commerce Minister Jurin Laksanawisit pledged to hasten the negotiations for the remaining free trade agreements with partners like Australia, Chile, and Japan to boost the country’s exports. The ministry was also urged by its constituents to prioritise attracting foreign investors to the Eastern Economic Corridor (EEC), a law that promotes the development of the ASEAN country’s Easternmost provinces for their metamorphosis into a technological manufacturing hub.
Trade war woes also plagued the banking and finance sectors. The Bank of Thailand cut its interest rates by 25 basis points to 1.5% in August 2019. The dovish move is part of easing monetary policies embraced by major central banks around the world. It will not help prevent capital inflows since the rates are low but the central bank is willing and ready to adjust its policies to readily address domestic issues.
These changes, however, may not be enough to mitigate the long-term effects of the trade war. One of Thailand’s best-performing sectors, the Financial Technologies (FinTech) industry, may help the Land of Smiles maintain a competitive financial growth and keep up with the ever-changing landscape of technology.
Benefits of FinTech to Thailand’s Economy
Compared to other Southeast Asian nations, Thailand welcomes FinTech and also has more advanced FinTech and cryptocurrency regulations (See DesFran’s article on Thailand’s cryptocurrency landscape here). The national government has even promoted the establishment of various regulatory sandboxes to encourage innovative solutions and tap on underserved market segments in the country.
The current policy allows investment clubs, accelerators, and local and multinational angel investors to provide seed and early-stage financing for promising companies. Innovators can also look to equity crowdfunding as a feasible alternative to raise the necessary funds. This method also helps them assess the demand for their FinTech product. The country’s Securities and Exchange Commission offers exemptions of up to 40 million THB for equity crowdfunding registration requirements. The Bank of Thailand has repeatedly sought to seek the incorporation of FinTech innovations into traditional banking systems to enhance productivity.
An immunity policy has been established to protect the banking sector from external volatility, including tumultuous geopolitical risks and to improve cybersecurity. Banks can also use data from state-of-the-art FinTech payment platforms to understand current business models that are succeeding or require optimisation.
Innovation in the FinTech sector potentially offer notable cost reductions in the long run and boundless benefits with regard to financial inclusivity and efficiency. New solutions will be able to streamline critical banking processes as the country moderately transitions to digitally-driven transactions. New opportunities in the e-payment and blockchain industry are also present for inventive entrepreneurs and foreign investors willing and able to see them.
Opportunities Await in Thailand’s Financial Sector
The ongoing trade war has affected Thailand’s economic performance in the past months, leading investors to speculate the currency’s strength. However, with swift policy implementation, solid economic foundations, and forward-facing policies,the Thai economy is capable of stabilising the baht’s value to emerge as one of the dominant currencies supporting ASEAN’s financial stability and prosperity. Thailand remains to be one of the most reliable investment destinations in the region.
DesFran’s new office in Bangkok extends our expertise in the finance industry to Thailand. Let us accompany you in navigating the country’s complex banking policies with years of experience and extensive networks.
Bank of Thailand Sees More Room to Ease After Surprise Rate Cut, bloomberg.com
Weakening Thai Economy Signals Trouble for Asia’s Top Assets, bloomberg.com
Commerce minister vows to speed up FTA talks, bangkokpost.com
What Does a Rising Baht Mean for Thailand’s Economy, thediplomat.com
About the Author
Joyce Sun is Strategic Communications and Research Intern at DesFran. Joyce enjoys learning as she writes financial news blurbs and editorials involving financial regulatory developments due to her keen interest in equities and finance-related topics. She is a final year honours student at the National University of Singapore hoping to pursue a career in the finance industry, and to continue developing her knowledge on investments.