Thailand set to ease rules on outflows to temper currency gain

Thailand’s central bank plans to further ease overseas investment rules by early next year, allowing more capital outflows so as to temper gains in the export-reliant nation’s currency.

The Bank of Thailand may increase the limit on foreign currency deposits and allow money transfer between foreign currency deposits held by individuals and companies, Deputy Governor Mathee Supapongse told reporters in Bangkok on Wednesday. It is also weighing scrapping the curbs on the types of overseas investment allowed in the long term and may only cap the amount spent, he said.

The pledge to ease rules on capital outflows comes after the baht’s surge from a 17-month low in April that threatens to aggravate the challenges for the Thai economy, which relies on tourism and trade. Both those drivers have been hurt by the virus pandemic, and continued baht gains pose a risk to the nation’s export competitiveness.

“We’re looking to create an ecosystem that will make it easier for Thai investors to invest abroad,” Mathee said. “This will not only help reduce the pressure on the baht but also diversify risks.”

The baht has rallied more than 6% from this year’s low in April, prompting the central bank to warn that if the currency were to strengthen quickly, it could hurt the nation’s economic recovery. Thailand has grappled with currency strength for a number of years. There was some respite when the baht weakened in the first quarter of 2020 during the global sell-off caused by the pandemic.

The proposed changes to capital outflows rules will provide flexibility to all categories of investors, Mathee said. The central bank has also proposed to soon unveil a revamped trading regime for gold to prevent the precious metal’s gains from adding to the currency strength.