Aggravation of Russian-Nato conflict will hit Thai economy hard
The Thai economy is likely to be severely affected by the ongoing tensions between Nato and Russia, Thai economists said on Monday.
US President Joe Biden has sent a signal to the North Atlantic Treaty Organization to accept Ukraine as a new member and the US has deployed over 3,000 troops in Poland and Germany.
Although the confrontation in eastern Europe is unlikely to develop into a full-scale war between Nato and Russia, the ongoing tension does not bode well for the global economy, which is still recovering from the impact of Covid-19, according to senior Thai economists.
Assoc Prof Dr Somchai Pakapatwiwat warned that if Russian President Vladimir Putin went ahead with his threat of strong retaliation in the event of Ukraine joining the Nato alliance, the global economy would be severely affected.
He said if Russia invaded Ukraine, as it has threatened it would, the United States and Nato nations would slap an economic boycott on Russia, causing a chain reaction in the global economy, pulling Thailand down as well, pointing to Thailand’s financial and trade ties with Russia.
The club of economic analysts of the Thai Bankers’ Association said Thailand’s economy could be affected in either of two scenarios.
In the first scenario, Russia invades Ukraine and retaliates against Nato member states by cutting off its gas supply to Europe — 46 per cent of European gas needs are imported from Russia.
Such a situation would lead to a spike in the prices of natural gas, coal and oil both in Europe and globally. Many businesses in Europe would have to close because of lack of energy.
The club also sees the prices of precious minerals, such as palladium, platinum, aluminium, copper, nickel and iron rising sharply in that scenario.
The club said the Thai economy would be affected by rising oil prices, that would add financial burden to the fund to control diesel oil price. Thai businesses that have to import goods which require precious minerals would see costs shoot up.
Thailand imports Bt152 billion worth of goods that use precious minerals as raw materials each year, and Bt7.7 billion worth of such goods are imported from Russia.
In the second scenario, Nato and the US retaliate against Russia by suspending all kinds of transactions with it. They would stop providing credits and loans to Russian banks as well as remove Russian banks from the international transaction alliance or SWIFT code.
This would cause very high inflation in Russia and the Russian rouble would be greatly depreciated. The situation would affect stock and bond markets and global gross domestic product would contract by 5 per cent.
Thai-Russian bilateral trade totalling Bt88 billion — Bt56 billion of imports from Russia and Bt32 billion exports — would be affected, they said.
The club added that the export and import of vehicles, rubber products, machines, vegetables and fruit, and electric appliances would be affected. Fewer tourists from Russia would visit Thailand because of the economic slump in their country, the club added.
