Although floodwaters from a recent deluge in Bangkok have largely receded, economists warn the impact on the Thai economy could be greater than initially expected because of forecasts of more rainfall and rising financial burdens on affected households.
Amonthep Chawla, head of research at CIMB Thai Bank, said flooding in most parts of Bangkok was relatively short-lived, but could still pose risks to the economy for the remainder of the year.
“It is probably too soon to say how much of an impact the floods will have on the economy. The extent of the damage and whether the economy can recover more quickly in the fourth quarter needs to be monitored,” he said.
“We also need to see what measures the government introduces to provide relief, compensation and economic stimulus. I believe the economic risks have increased.”
Affected households will need to spend money to replace damaged belongings, potentially pushing household debt higher, while small and medium-sized enterprises (SMEs) squeezed by liquidity constraints could feel the financial impact for some time.
“The government and concerned agencies need to assist those affected, helping them get back on their feet,” said Mr Amonthep.
“Otherwise, what initially appears to be a flood lasting just two or three weeks could leave a long-term scar on the economy.”
Such effects could turn a short-term disruption into a medium-term economic problem, making support for affected households and businesses essential, he said.
Effective communication with the international community about the scope of the flood impact is also vital to maintain confidence in investment and exports.
“There has been no significant impact on industrial estates like there was during the 2011 floods. As a result, we have not seen the same kind of supply chain disruption,” said Mr Amonthep.
Koraphat Vorachet, assistant managing director and head of research at Krungsri Securities, said its economists estimate the latest floods could reduce gross domestic product (GDP) by around 0.2 percentage points, compared with a 3-percentage-point dip during the devastating floods in 2011.
However, recent heavy fund outflows from the Stock Exchange of Thailand (SET) partly reflect foreign investors’ concerns that the floods could have a greater economic impact than previously estimated, said Mr Koraphat.
“Although Bangkok’s rainfall eased from Sept 30 to Oct 1, flood risks in the lower Chao Phraya basin have not passed their peak,” he said.
Forecasts indicate increased rainfall across Thailand from Oct 5-8, with heavy rain expected in some areas.
Increased water releases from the Chao Phraya and Pasak river systems, combined with high tides in early October, mean communities along the Chao Phraya River and major northern drainage routes remain at risk.