Dry spell to cut half-point off growth

Farmers dub weather worst in 50 years

The ongoing drought is expected to cost an estimated 68 billion baht to the Thai economy, shaving 0.52 percentage points off full-year GDP growth this year.

The dry spell is another burden to farmers already struggling with debt and low prices, increasing downside risks to the economy, according to the latest study by the University of the Thai Chamber of Commerce (UTCC).

“Drought is considered another key risk to the Thai economy this year,” said UTCC vice-president Thanavath Phonvichai.

“The government needs to speed up not only short-term measures to help relieve the agricultural sector but also strategic plans to tackle light rainfall in the future.”

The university’s survey of 1,200 farmers nationwide from July 1-4 found 90% described the drought as the most severe in 50 years, affecting 12 million rai of farmland in 25 provinces, or 20% of the 60 million rai of total farmland nationwide.

The drought results i n higher production costs, increased water procurement costs, lower productivity and farmer income, and higher household debts.

Earlier Finance Minister Sommai Phasee predicted the drought would trim half a percentage point off GDP growth this year, while the Fiscal Policy Office estimated the El Nino weather phenomenon would pare 0.15 percentage points.

Mr Thanavath said the government needed to pump in 70-100 billion baht to offset lost income from farmers if it wants to see Thailand’s economy grow by more than 3%.

“Overall economic prospects remain weak,” he said. “We expect the economy has not fully recovered and if consumer purchasing power remains weak in the third quarter, GDP growth may slip below 3%.”

Mr Thanavath said overall rice prices were expected to remain relatively low this year, with prices of paddy with 15% moisture averaging 7,697 baht per tonne now compared with 7,753 baht year-on-year.

Farm income is expected to drop by 15% this year, particularly for small-scale farmers with fewer than 20 rai of farmland.

Somkiat Anuras, vice-chairman of the Thai Chamber of Commerce, said trading activities in the provinces might be hard hit by the drought because rural people would see their purchasing power weaken.

“We hope a tourism recovery in the provinces will help ease their hardship,” he said.

Rawee Rungruang, chairman of the Thai Farmers Network, said the situation had gone from bad to worse.

Farmers in the central plains, who were asked to delay their farming in response to the ongoing drought, are now taking on more debt to support daily family expenses and their children’s education.

“Farmers are highly patient and vigorous, with some trying to raise extra income from livestock and poultry during the drought,” said Mr Rawee.