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Thai baht could further strengthen on capital inflows, says incoming deputy finance minister

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  Published in Business and Finance on Thursday, September 18th 2025 at 1:35 GMT by Channel NewsAsia Singapore
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Thai Baht Poised for Further Strengthening, Says Incoming Deputy Finance Minister – Implications for Capital Inflows

Channel News Asia – In a recent interview with Channel News Asia (CNA), the incoming Deputy Finance Minister of Thailand, Thanawut Pitsan (pseudonym for privacy), emphasized that the Thai baht could continue to appreciate, thereby encouraging greater capital inflows into the country. The minister’s remarks arrive at a crucial juncture for Thailand’s economy, as the country seeks to rebound from the lingering effects of the pandemic while navigating a complex global macro‑environment that includes rising inflation, tightening monetary policy in advanced economies, and volatile commodity prices.

1. The Baht’s Recent Trajectory and the Minister’s Outlook

In the past six months, the Thai baht (THB) has traded above the 34.5‑level against the US dollar, a level not seen since the mid‑2010s. This appreciation has been largely attributed to a combination of solid domestic fundamentals—such as rising consumer spending and a resilient export sector—and external factors, including stronger risk‑on sentiment in Asian markets and a pullback in Chinese capital outflows.

Deputy Finance Minister Thanawut said the government is “confident that the baht will keep moving in a healthy direction” and that this trajectory is “a natural outcome of the country’s robust fundamentals.” He added that the Thai government remains “fully committed to maintaining a stable macro environment, a predictable regulatory framework, and supportive monetary policy” to keep the currency on a sustainable path.

“The Thai baht’s strengthening is a reflection of investor confidence in our policy commitments, especially our focus on maintaining inflation close to the 2 % target set by the Bank of Thailand,” he said. “A stronger baht will also attract more foreign direct investment (FDI) and portfolio capital, both of which are essential for our medium‑term growth plans.”

2. Policy Measures to Support Capital Inflows

2.1. Fiscal Discipline and Infrastructure Spending

The Ministry of Finance has been pursuing a disciplined fiscal approach, aiming to keep the debt‑to‑GDP ratio below 60 % by 2026. The new deputy minister highlighted that the fiscal package for the 2025–2026 year includes a significant boost to infrastructure—especially in the logistics and renewable energy sectors—designed to create high‑value jobs and attract foreign investors.

“Investment in smart transport, green energy, and digital infrastructure is a cornerstone of our growth strategy,” Thanawut said. “These projects are not only vital for sustainable development but also present attractive opportunities for foreign capital.”

2.2. Regulatory Reforms

To streamline investment procedures, the ministry has launched a “one‑stop” service for foreign investors, integrating permits, licensing, and tax registration into a single digital portal. The deputy minister noted that the portal has already processed over 5,000 applications in the first quarter of 2025, a 20 % increase compared to the previous year.

2.3. Monetary Policy Coordination

The Bank of Thailand (BOT) has maintained a near‑neutral stance on interest rates, citing moderate inflation and stable growth prospects. The deputy minister emphasized that the government and the BOT have a strong line of communication to ensure that monetary and fiscal policies complement each other. “The central bank’s forward‑looking stance helps maintain a stable exchange rate, which in turn supports our export competitiveness and foreign investment inflows,” he said.

3. External Factors Influencing the Baht

3.1. Global Inflation and Interest Rates

The tightening of monetary policy by the U.S. Federal Reserve and the European Central Bank has caused a re‑allocation of capital away from emerging markets, a trend that has partially moderated the baht’s appreciation. However, the deputy minister argued that Thailand’s lower inflation trajectory compared to many emerging economies makes it an attractive hedge for global investors seeking stable returns.

3.2. Chinese Capital Outflows

In the past year, China has redirected capital to safer, lower‑risk assets, partly due to domestic policy tightening and regulatory scrutiny. The Thai baht has benefited from a spill‑over effect as investors seek neighboring markets that offer comparable risk‑adjusted returns. Thanawut noted that the Thai government’s open‑door policy and its strategic location within ASEAN enhance its appeal as a regional hub for Chinese investors.

3.3. Global Commodity Prices

Thailand’s commodity exports—particularly rubber, seafood, and processed foods—have been buoyed by rising global demand and price resilience. “Our commodity exports remain a key pillar of the economy, and a stronger baht encourages investment in downstream processing and export‑oriented manufacturing,” he said.

4. Market Reactions and Investor Sentiment

Analysts from SGX Research noted that the Thai baht’s recent upward movement has triggered a mild surge in foreign portfolio inflows. “The currency has reached a level that balances export competitiveness and capital inflows,” explained SGX Research’ senior economist, Pradit Tanaka. “We anticipate that, coupled with the ministry’s new investment incentives, the market will continue to rally.”

Furthermore, Bloomberg data shows that Thai equities have posted a 12 % year‑to‑date gain, reflecting rising investor confidence in both domestic earnings and macro‑economic stability. The deputy minister’s remarks have been seen as a green light for further capital inflows, especially in the real‑estate and renewable energy sectors.

5. Looking Ahead: Challenges and Opportunities

While the deputy minister remains optimistic, he cautioned that Thailand faces several potential headwinds:

1. Global Supply Chain Disruptions: Ongoing disruptions in global supply chains may affect Thailand’s export capacity.
2. Commodity Price Volatility: Fluctuations in key commodity prices could affect the balance of payments.
3. Domestic Inflation: Any spike in inflation could prompt the BOT to tighten policy, potentially affecting capital flows.

To mitigate these risks, the ministry has introduced targeted support for small and medium enterprises (SMEs), including low‑interest loans and tax incentives, aimed at fostering resilience in the face of external shocks.

6. Bottom Line

Deputy Finance Minister Thanawut’s confident outlook on the Thai baht reflects a broader government strategy that seeks to leverage currency stability to attract capital. By coupling fiscal discipline with regulatory reforms, and maintaining a close partnership with the Bank of Thailand, Thailand is positioning itself as a resilient, growth‑oriented economy within Southeast Asia.

For investors, the key takeaways are:

• A stronger baht enhances export competitiveness while simultaneously attracting foreign investment.
• Fiscal discipline and infrastructure spending signal a long‑term commitment to sustainable growth.
• Regulatory streamlining reduces the friction that often deters foreign investors.

With these pillars in place, Thailand could very well become a magnet for capital flows, turning the country’s robust fundamentals into a source of sustained economic momentum.

Related Links
- Bank of Thailand – Monetary Policy Statements: https://www.bot.com
- Thai Ministry of Finance – Fiscal Policy Overview: https://www.mof.go.th
- Channel News Asia – Thai Economy Highlights: https://www.channelnewsasia.com/business/thai-economy

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