Listen to this story |
Kasikorn Research Center (KResearch) slashed their economic growth projection for Thailand down to less than 3 per cent for 2022 after Russia’s invasion of Ukraine led to higher energy and commodity prices.
“Besides the ongoing outbreak of new Covid variants, the Russia-Ukraine crisis is also affecting Thailand’s economic recovery via rising energy and commodity prices including industrial metals and agricultural commodities that are being used as raw material for productions,” Nattaporn Triratanasirikul, KResearch Assistant Managing Director, said in a statement on Friday.
After observing impacts from the war, the research center cut its GDP prediction for 2022 down from 3.7 per cent to 2.9 per cent.
The new GDP projection is based on assumptions that the war will end via negotiation within the third quarter of 2022. In this scenario, the reserch center expects inflation to hover around 3.8 per cent, and Dubai’s average oil prices will likely be around US$90 per barrel.
If the war in Ukraine does not end this year, Nattaporn explained that inflation could hover around 4.5 per cent as Dubai’s average oil prices sitting around $105 per barrel. In this scenario, Thailand’s GDP is expected to expand by only 2.5 per cent.
Dubai’s oil price was at $112.59 per barrel on Friday afternoon, while Brent crude, the international benchmark, was at $118.08 per barrel.
Nattaporn noted that the Ukraine-Russia war’s impact on the Thai economy will mainly be on inflation, which could rise to 4.5 per cent as the government’s current policy is to only hold the diesel price at 30 baht per liter until the end of April.
“This means that the price of diesel could exceed 30 baht per liter in the second half of the year if the global crude oil prices continue to increase,” Nattaporn said.
She also pointed out that rising energy and commodity prices will cost Thailand’s manufacturing sector 80 billion baht in added production costs, but the impacts will be varied based on the use of raw materials for production in each sector.
Tourism will also be affected by less Russian and European tourists. They maintain that there will be around four million foreign tourists in 2022, but income from tourism may drop by 50 billion baht, as Russians and Europeans are heavy spenders.
Inflation will also affect people’s purchasing power which will lead to a drop in sales in many industries, including automobiles, electronics, retail and food.
“We predicted since last year that inflation will be one of the risks to the Thai economy in 2022, but the Russia-Ukraine crisis is exacerbating its impact,” Nattaporn said.