Floods to cast shadow over economic growth: UTCC study

The study by the private sector's think-tank showed that the floods in the South since April and the current flooding in the Central region and the North of the country will dent the country's gross domestic product by 0.5-0.7 percentage point, worth Bt58.49 billion.

The setback was attributed to the impact on the agriculture sector, worth an estimated Bt31.5 billion; Bt11.73 billion to the trading sector; Bt8.73 billion loss of public property; Bt2.21 billion to housing; Bt1.89 billion to tourism; and Bt1.48 billion to the industrial sector.

Of the estimated losses, Bt32.41 billion was due to the flooding impact from July to September, while Bt26.07 billion was from flooding in the southern part in April-May this year. "Despite the government's economic stimulus package, the Thai economy is at high risk of a slowdown in growth due to severe floods.

"The economic stimulus measures of the government will have only a small impact on the Thai economy this year as most of the measures, including salary hikes, higher labour costs, and tax reductions in the first-car and first-house schemes, will become fully effective only next year," said Thanavath Phonvichai, director at the UTCC's Economic and Business Forecasting Centre.

He said losses from the flooding could rise to Bt100 billion if the flooding lasts till the end of the year and the government is slow in reacting.

Moreover, the global economic slowdown, in particular in the United States and the European Union, would also shrink the growth of the Thai economy.

The ratings and credit cuts of several banks in the US, and the |financial crunch in Italy's economy, which is the third largest in the |EU, would continue to severely impact the global economy.

The budget cuts, which will continue to be adopted in many countries in the EU, would also slow growth in the global economy this year and next, Thanavath noted.

To ensure growth, he suggested that the government develop 25 watersheds to absorb water during the rainy season. The government should not cut the budget to tackle the flooding problem.

Based on the survey of 1,200 respondents, the UTCC poll showed that 27 per cent of them were affected by the flooding, about 18 per cent were seriously affected, 18 per cent were slightly hit, while 27 per cent were not affected at all.

 Saowanee Thairungroj, vice president of the UTCC research division, pointed out that almost 80 per cent of respondents were not satisfied with the government's measures to tackle the flooding, while only about 20 per cent said the government has worked promptly to resolve the problem.

Meanwhile, the UTCC poll showed that spending during the 10-day Vegetarian Festival would grow slightly by 4.8 per cent, worth Bt35.1 billion this year, at a lower rate than last year due to concerns about the flooding, which would lead to lower spending.

Saowanee said the higher spending this year was due to higher food prices, as many vegetables were destroyed in the floods, pushing up prices.