Overview of the Revised Forecast#
Bank of America has updated its forecast for the Thai baht, predicting that it will weaken to 33 baht per U.S. dollar by mid-2026. However, the bank anticipates a recovery, expecting the currency to strengthen to 31 baht per dollar by the end of the same year. This is a change from their previous forecast of 30 baht per dollar.
Factors Influencing the Baht#
The bank attributes this adjustment to several factors, including a recent spike in oil prices and a strong Thai nominal effective exchange rate. The nominal effective exchange rate is a measure that reflects the value of a currency against a basket of other currencies, adjusted for inflation. Following the recent elections, there have been significant equity inflows into Thailand, which have contributed to the currency's strength.
Current Account Challenges#
Thailand's current account, which tracks the country's transactions with the rest of the world, is facing challenges. The second quarter has seen a decline due to seasonal weaknesses in tourism and outflows of income. With oil prices stabilizing above $80 per barrel, there are concerns that Thailand's current account could slip into deficit, putting additional pressure on the baht.
Future Outlook#
Despite the current challenges, Bank of America believes the weakness in the baht will be temporary. They expect the currency to appreciate to 31 baht per dollar by the end of 2026, driven by improvements in Thailand’s basic balance surplus, which includes the current account and foreign direct investment flows. This suggests that while the baht may face short-term hurdles, a recovery is anticipated in the latter part of 2026.