ASEAN KEY DESTINATIONS
Thai floods may dampen GDP
Preliminary damage estimates are that the current Thai flood could depress the GDP by 0.9 percentage points if it does not reach Bang kok, as the cabinet today considers increasing the account deficit to cover the cost of rehabilitating the victims. The 2012 fiscal budget also requires revision to allocate more for infrastructure investment to deal with flooding in the future.
The country's worst floods in 50 years are expected to spread to other areas including Bangkok. Deputy Prime Minister Kittiratt Na-Ranong yesterday chaired a discussion among the Finance Ministry, Bank of Thailand, National Economic and Social Development Board (NESDB) and the Budget Bureau on the impact of the flood on the economy and long-term preventive measures.
He said 100 billion baht (US$3.2 billion) would be needed for projects to prevent flooding in the future. The current fiscal budget for 2012 accounts for a deficit of 350 billion baht ($11.3 billion).
He added the government needs to earmark annual fiscal expenditures for the task over the next 3-5 years, noting the first priority is relief for floods victims and rehabilitation.
Finance Minister Thirachai Phuvanatnaranubala said the ministry estimated the damage between 0.6 percent and 0.8 percent of GDP, depending on the scope of affected areas.
Somchai Sujjapongse of the Office of Fiscal Economic Policy said its projection of 69 billion baht worth of damage, or around 0.6 percent of GDP, did not include Bangkok and assumed the floods would last longer than a month.
Prasarn Trairatvorakul, the central bank governor, estimated the agricultural sector would lose 16-20 billion baht in damage and Saha Rattana Industrial Estate 25-30 billion, but it has not yet made an estimate on Rojana Industrial Park.
Dr. Prasarn said the central bank would consider specific assistance measures for affected businesses rather than monetary policy for the whole economy, while also beefing up local banks' computer systems to cope with the flood.
The NESDB is more pessimistic, with an estimate of 90 billion baht in damage or 0.9 percent of the GDP, with 40 billion from the farm sector and 48 billion from four industrial estates and other factories in Ayutthaya. It has not included Nakhon Sawan in its estimate.
The figure is based on the assumption that factories are inactive for two months.
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