Thai Baht May Fall 5.6% by Year-End on Growth Risk

Thailand’s baht may slide 5.6 percent by year’s end as the nation’s economy shrinks at the fastest pace in a decade, deterring global funds, UBS AG said.

The currency, which dropped 15 percent last year, the third- worst performance among Asia’s 10 most-active currencies against the U.S. dollar, will extend losses as government pump-priming fails to avert a 3 percent contraction, said Nizam Idris, Singapore-based currency strategist at UBS. Overseas investors sold $154 million more Thai shares than they bought since the start of 2009, according to data.

“We are right in the eye of the storm,” Nizam said in an interview today. “There isn’t much capital flows. Thailand is likely to see the economy slowing sharply this year. The baht will remain quite weak.”

Nizam predicts the baht, which traded at 34.95 per dollar as of 12:54 p.m. in Bangkok, will fall to 36 by the end of June and to 37 by the end of 2009, Nizam said. The median estimate of 20 analysts surveyed by Bloomberg News is for a year-end level of 36.

Prime Minister Abhisit Vejjajiva is boosting spending and waiving taxes to spur expansion. Six months of anti-government protests that culminated in a blockade of Bangkok’s airports in November sent business sentiment to a record low.

The economy may expand no more than 2 percent this year, the slowest pace since 1998, on sluggish exports and investment, according to the central bank.

Confidence Low

Political woes last year prevented the previous government from following through on promises to spend about $50 billion over four years on infrastructure projects and ease restrictions on foreign investment. Abhisit, elected by parliament on Dec. 15, replaced Somchai Wongsawat, the brother-in-law of former Prime Minister Thaksin Shinawatra, who was ousted in a 2006 coup.

Thailand’s lawmakers last week passed a 117 billion-baht ($3.3 billion) stimulus package proposed by Abhisit, which includes cash handouts to the elderly and free school supplies. That is in addition to 40 billion baht in tax breaks.