At a time of unconventional policies imposed by major central banks, Thailand should safeguard its macroeconomic stability by standing firm on its monetary policy and maximising fiscal policy, economists say.
Despite pressure on the Bank of Thailand to lower its policy interest rate to curb the baht's strength, there is no need to take such action or impose capital controls because the currency's value has not appreciated sharply compared with other regional currencies, said Amonthep Chawla, head of research at CIMB Thai Bank.
Thailand's central bank has other tools up its sleeve to help weaken the baht while maintaining macroeconomic stability, such as further relaxation of restrictions on capital outflows, he said.
"[Baht appreciation] is not deemed as a fundamental shift as capital inflows are incurred because investors remain uncertain of how global financial volatility will turn out," Mr Amonthep said.
The European Central Bank and its Japanese counterpart have adopted negative interest rates and pumped massive amounts of money into the system via asset purchases to beat deflation and revitalise economic growth. The moves have prompted investors to seek higher investment returns, causing a surge in capital inflows into emerging markets.
The baht has gained 2.7% against the US dollar this year amid signs of inflows flocking back into Thai financial assets, according to Reuters. In 2015, the baht slid by 8.7%.
Bank of Thailand governor Veerathai Santiprabhob recently highlighted stability as the major task of central bankers, noting the innovative policy manoeuvres and persistent quantitative easing employed by all major economies have tested monetary officials in dealing with the fallout from the outside.
Mr Amonthep said the central bank's Monetary Policy Committee (MPC) was expected to stand pat on the 1.5% benchmark interest rate throughout this year in order to preserve financial stability.
The baht's outlook remains on a weakening path on the back of the US Federal Reserve's rate normalisation, China's disappointing economic performance and the ensuing currency war aimed at boosting export growth value, he said.
China's central bank is expected to continue easing its monetary policy given the sharp contraction in February's exports and the move would pressure regional currencies to depreciate, Mr Amonthep said.
Central banks in Europe and Japan, meanwhile, seem to be stuck in a monetary policy trap, opting for extreme monetary easing that has not produced any fruition.
The European and Japanese commercial banking sectors need to implement structural reforms to boost economic growth and regain investors' confidence, he added.
Somprawin Manprasert, an associate professor at Chulalongkorn University's faculty of economics, agreed that the MPC should not resort to further monetary easing because Thailand's economic recovery and inflation have started picking up and such a move would induce confusion in the domestic financial market.
Capital controls should not be used because they would eliminate investors' confidence, he said.
"Thailand should emphasise using fiscal policy since there is fiscal space and the effectiveness is more tangible," Assoc Prof Somprawin said.
The recent baht appreciation is not expected to take a huge toll on shipments because Thailand should address structural problems related to its export industry without focusing too much on export value.
Authorities should manage short-term financial volatility by preserving monetary policy space and using fiscal injection while focusing on managing the baht's depreciation in the long run as a result of the Fed's imminent rate rises and China's economic uncertainty, Assoc Prof Somprawin said.