Economic slowdown, drought risk to hinder Thai economy in H2

The prospect of a domestic economic slowdown in the latter half of the year has been raised due to multiple factors, including potential drought, political uncertainties, and a slow global economy, according to the Employers’ Confederation of Thai Trade and Industry (EconThai).

EconThai’s vice-chairman, Tanit Sorat, highlighted that the global economy is predicted to experience growth of less than 2.1% in 2023. Factors such as an incomplete recovery of the Chinese economy and a diminishing US market are expected to impact Thai exports negatively, resulting in an economic slowdown.

In April, the Commerce Ministry unveiled a seventh consecutive month of decline in the customs-cleared value of exports, reflecting a 7.6% year-on-year decrease, amounting to US$21.7 billion. Meanwhile, imports fell by 7.3% to US$23.2 billion, culminating in a trade deficit worth US$1.47 billion. This data indicates a continued economic slowdown in the country.

Another issue impacting the domestic economy is political uncertainty, particularly surrounding the possibility of the Move Forward Party (MFP) and its seven political affiliates forming a new government, led by prime ministerial candidate Pita Limjaroenrat of the MFP. Any delay in government formation can potentially damage the business sector’s confidence, resulting in an economic slowdown.

“Foreign investors have delayed their investments here because they want to know the investment policies of the new government and make sure that the new administration will not change the policies initiated by its predecessor,” said Tanit.

Tanit also expressed concern that a slow process in forming a new government might affect the budget planning for fiscal 2024, which would impact attempts to stimulate the domestic economy and potentially exacerbate the ongoing economic slowdown.

Drought is another factor that can create pressure on the economy, as water scarcity would decrease the volume of agricultural produce, and increasing prices would negatively affect the export sector. “Drought is expected to last from 2023 to 2026 due to El Niño and the impact of climate change on many countries, including Thailand,” Tanit said.

However, EconThai has not observed a coherent strategy to prepare for potential drought conditions and safeguard domestic food security. The Joint Standing Committee on Commerce, Industry and Banking submitted a proposal to Prime Minister Prayut Chan-o-cha on May 31, hoping to collaborate with the government to mitigate any severe impact caused by water shortages, reported Bangkok Post.

The business community is urging authorities to develop mid-term and long-term solutions that ensure the continuation of investment projects, even amid unpredictable circumstances such as drought to address the economic slowdown.