Research & Application

drought impacts

A farmer in Suphan Buri’s Sam Chuk district swaps rice for sugar cane. The government wants farmers to grow crops that consume less water to ease the effects of the drought. (Photo by Patipat Janthong)

The drought is expected to cut economic growth by 0.6 to 0.8 of a percentage point this year, with predictions of an even more severe impact if the dry weather continues after mid-year, the University of the Thai Chamber of Commerce says.

The country is facing its worst water shortage in two decades, with 14 out 76 provinces hit and large areas of farm land at risk, adding to the problems of Southeast Asia’s second-largest economy, which is still struggling to expand.

The drought is expected to last until June, when the rainy season usually begins, costing the country’s about 119 billion baht.

But the damage could reach 154 billion baht if it continues until October, Thanavath Phonvichai, an economics professor at the university, told a news conference.

“It’s more likely that the economy will grow less than 3% this year as exports could contract more than expected,” he said.

The university previously forecast economic growth of 3.0%-3.5% and that exports would be flat, or rise 2%. Exports are worth more than 60% of gross domestic product.

The central bank on Wednesday cut its 2016 GDP growth forecast to 3.1% from 3.5% and reduced its export estimate to a 2% fall from no change.

In 2015, the economy expanded 2.8%, up from 0.8% in 2014 but its recovery remains patchy.

The government has introduced measures to help farmers cope with drought and weak commodity prices amid high household debt. But billions of dollars in government spending aimed at reviving the ailing rural economy have failed to reach farmers, fuelling disaffection with the military government ahead of elections expected next year.

A survey conducted by the university showed that household debt among farmers this year jumped 12.1% from last year to a record 167,000 baht per household on average.

“Farmers can’t shoulder the drought impact on their own and have to borrow to survive. They are hoping for help from the government … What the government will also have to do is create jobs,” Mr Thanavath said.