Policy options for an overvalued baht

This is the last article of 2025.

- Chartchai Parasuk

An image of Thai baht banknotes and coins, and a bank savings account passbook. 123RF

I have to thank readers for following my articles throughout the years. I believe I wrote my first article for the Bangkok Post in January 2020. So, it has been a five-year collaboration with the paper. Thank you, Bangkok Post.The primary purpose of my articles is to provide a professional assessment of current economic conditions and offer sound recommendations. It does not matter whether the suggestions are adopted by Thai authorities. My job is to advocate honest opinions.

However, honesty does not always mean popularity. I am not concerned whether readers agree or disagree with the articles. I would continue to think outside the box, go beyond textbook interpretations, and take advantage of international experience. Oftentimes, classroom theories are not effective in the real world. Administering exchange rates through traditional tools of interest rate adjustments and direct interventions is one of them.

All economic textbooks say that exchange rates should not be administered but freely floated under the “flexible exchange rate regime”. Thailand, after the disastrous 1997 financial crisis, abandoned the fixed exchange rate regime in favour of a flexible exchange rate regime. Theoretically, the flexible exchange will allow an economy to automatically adjust to its best benefit. It is the concept of invisible hands. However, sporadic interventions are acceptable to smooth out irregularities. Therefore, it is a common practice of central banks around the world to buy/sell their own currencies to smooth out irregular movements.