Israel-Iran conflict threatens Thai economy in Q2
The ongoing conflict between Israel and Iran poses a potential threat to the Thai economy in the second quarter. Anticipated challenges include currency depreciation, an increase in oil prices, and a decrease in purchasing power.
This comes after the International Monetary Fund reduced its Thai GDP forecast significantly from 4.4% to 2.7% growth, due to a slump in domestic consumption.
Earlier this month, the conflict affected Asian stock markets and gold prices. Furthermore, an increase in energy prices could lead to a rise in living costs and dampen economic prospects.
Gold prices surged over US$2,400 an ounce due to fears of a wider conflict between Israel and Iran. Investors sought security in the precious metal, causing domestic gold to reach a record high of 42,000 baht per baht-weight. However, after Tehran downplayed the significance of Israel’s retaliatory drone strike, gold prices cooled down.
The conflict also caused the Stock Exchange of Thailand (SET) index to dip by 2.13% to 1,332 points, the lowest in over three years, increasing fears of a widening conflict across the region. However, the SET rebounded by 1.3% as concern over Middle East conflicts subsided.
The rise in geopolitical conflicts led to an increase in oil prices, which could result in more persistent inflation. Consequently, the Fed may delay cutting interest rates until late 2024, limiting any SET index rebound.
Impact on global supply
National oil and gas conglomerate PTT Plc assures that Thailand has sufficient oil to meet demand amid concerns over the impact of the Israel-Iran conflict on global supply. The Bank of Thailand acknowledges the baht’s volatility against the US dollar and its greater depreciation compared with regional peers, which is primarily driven by external factors.
Thai National Shippers’ Council Chairman Chaichan Chareonsuk stated that exports could experience a slight impact from Mideast skirmishes because there is minimal trade value between Thailand and Iran.
“However, if the tension escalates and expands to include other countries in the region, Thai exports will be severely affected.”
Siripakorn Cheawsamoot, the deputy governor for Europe, Africa, the Middle East, and the Americas at the Tourism Authority of Thailand (TAT), also revealed that El Al Israel Airlines still maintains one to three daily flights as usual from Tel Aviv to Bangkok and Phuket. These flights are still in overwhelming demand, despite the conflict.
Energy information provider Platts reported that the weekly global average jet fuel price ending on April 19 fell by 3.7% compared with the week before to US$106.89 per barrel, after soaring to US$111.3 in the first week of April.
Wutthiphum Jurangkool, chief executive of Nok Air, said that while jet fuel prices didn’t surge because of ongoing conflicts in the Middle East, most airlines were affected by the weak baht as the majority of airline expenses must be paid in US dollars, reported Bangkok Post.
