Thai corporations prepare for business impacts as conflicts continue

One of the biggest concerns is the ongoing conflict in Ukraine, which has disrupted global supply chains and led to higher energy prices, potentially hurting Thai businesses.

Disathat Panyarachun, CEO of Thailand's largest oil and gas retailer, PTT Oil and Retail Business, said that the conflict in Ukraine could lead to higher fuel prices in Thailand. The company is taking steps to mitigate the impact, such as increasing its inventory of fuel and negotiating with suppliers to secure long-term contracts.

Thammasak Sethaudom, the president of Siam Cement Group. the country's largest cement and building materials producer, also indicated that his company is monitoring the conflict in Ukraine, noting that it could lead to higher costs for raw materials, such as coal and steel. SCG is taking steps to diversify its sources of raw materials and improve its efficiency to mitigate the impact.

In addition to the Russia-Ukraine war, Thai businesses are also concerned about the rise of protectionism and economic nationalism. These trends could lead to higher tariffs and other barriers to trade, making it more difficult for Thai businesses to export their products and services.

To prepare for these challenges, Thai businesses are taking steps to diversify their markets and reduce their reliance on any single country or region. They are also investing in research and development to develop new products and services that are more resilient to changes in the global economy.

Countries whose economies are still floundering are also being closely watched. They include China, yet to fully recover from the effects of the pandemic, as well as Vietnam and Cambodia. Vietnam is still facing problems in the real estate sector while Cambodia’s economy is tied to China.

Nevertheless, the overall economic outlook in Thailand seems to be improving. This is attributed to the government's policies that have seen investment budgets approved. Tourists are expected to return in greater numbers, and foreign investments, as encouraged during Prime Minister Srettha Thavisin's overseas trips, are expected to increase. The domestic interest rates are also being closely monitored to see if they will decrease. Foreign interest rates have already begun to decline.

Meanwhile, the Federation of Thai Industries’ chairman Kriengkrai Thiennukul stated that the current geopolitical situation poses significant challenges, requiring the Thai industrial sector to closely monitor developments.

He particularly highlighted the crisis in the Red Sea where Yemen’s Houthi group continues to attack commercial vessels. This route is crucial for the transportation of goods between Asia and Europe, resulting in shipping rates and risk insurance premiums soaring by more than US$3,000-5,000 and causing a minimum delay of 14 days in travel time.

Moreover, Thai exports to Europe, including computers, cars, jewellery, motorcycles, processed chicken, and agricultural machinery, as well as imports from Europe, such as medicines, electrical machinery, chemicals, circuit boards, scientific and medical instruments, animals and related products, are all expected to be impacted by the rising logistics costs.

Kriengkrai added that Thai manufacturers importing raw materials from Europe have yet to feel a significant impact due to existing inventory. However, the consequences are expected to affect the production cycle in the second quarter. Industries relying on imports from Europe will need to expedite planning to adjust orders to ensure smooth production.

Despite an increase in transportation costs, product prices have not been adjusted, resulting in a reduction in profits for the current year.