Economic damage from El Nino could hit 40-60 billion baht
Economists are concerned about the impact of El Nino on the Thai economy, noting that the damage could reach around 40 billion baht or even 60 billion baht if the situation is prolonged.
Kiatnakin Phatra Bank predicts a severe and prolonged impact that may extend into the next year, while the Thai Meteorological Department sees similarities with the El Nino events of 2015 and 2019.
Thailand is facing a severe drought, which is negatively affecting the country's gross domestic product (GDP), leading to a contraction of 6.5%.
The warning signs from the drought and the onset of El Nino are becoming increasingly concerning. The rising trend of hot spells and the continuous low rainfall throughout the country are causing a reduction in water levels in various reservoirs. Should the worsen, the impact on Thailand's agricultural sector, as well as the industrial and service sectors heavily reliant on water, could be significant.
Siam Commercial Bank (SCB) Economic Intelligence Centre also expressed pessimism, saying that the current El Nino system is considered to be in an early or moderate stage, and is expected to intensify in the second half of this year due to lower rainfall.
Rainfall data for June clearly indicate that the return of El Nino could lead to severe drought conditions in the northern, central, eastern, and western coastal regions, surpassing the conditions observed in the previous quarter.
It is therefore highly likely that the impact of El Nino will be more significant than the baseline scenario previously estimated. The baseline scenario projected agricultural losses of around 40.41 billion baht, including losses in rice production at 7.49 billion baht, corn at 18.46 billion baht, sugarcane at 12.55 billion baht, and tapioca at 1.9 billion baht.
If El Nino persists, the worst-case scenario estimates that the damage could reach as high as 63.80 billion baht, with losses in rice production at 13.29 billion baht, corn at 23.62 billion baht, sugarcane at 23.77 billion baht, and tapioca at 3.12 billion baht. And with the weather phenomenon predicted to intensify in 2024, the impact on Thailand's economy will be even greater.
If the impact of El Nino is less than expected and better than the baseline scenario, the estimated damage to the agricultural sector would still be around 21.79 billion baht, causing an increase in the cost of goods and potentially contributing to inflation.
