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24 Jul 2009

Thai Economy

H1N1 Flu to lower GDP 0-6%: Needs Urgent Govt. Solution (Business Brief No.2572)

The intensifying outbreak of H1N1Fluis posing a great risk to our economy. KASIKORN RESEARCH CENTER (KResearch) expects that this pandemic will linger for a long time, perhaps even throughout the entire half of this year, not to mention the possibility that it will be prolonged into next year. A clear assessment about the impact to the economy may be difficult as the situation next year seems rather difficult to predict. KResearch has assessed the possible impacts of it during 2H09 under the assumption that if its virulence goes beyond control of pandemic spread, it may carry on until 4Q09. However, the production of vaccines for it is in progress. If the vaccine becomes available for the public by around 4Q09, the chance of the virus spreading further and rising death toll will subside.
Our assessment on the situation in both positive and negative respects leads to the projection that it will have widespread impact on tourism and service businesses and inhibit the Thai economy in 2009, costing us at least THB60 billion. However, medical treatment an public concerns to fight the outbreak will likely generate additional economic value of not less than THB9 billion, thanks to strong disease prevention and health care trend where the spending of consumers and the business sector on related products is increasing. Meanwhile, it will be necessary for the authorities to allocate additional funding to contain the outbreak.
Overall, KResearch expects that this 2009 flu pandemic will cause economic losses of at least THB51 billion, this year, shrinking the GDP by at least 0.6 percent, resulting in a probable contraction of (-)4.1 percent from the former projection that the shrinkage is in a range of -3.5 to -5.0 percent. The variables that could help ease the impact of this flu outbreak include economic rebounds in the global economy and hoped-for higher exports, plus expeditious governmental budgetary disbursements and other problem solving measures.
Concerning measures to reduce the impact of this pandemic, cooperation by all parties in society will be needed. The government must take an important role in equipping the people with relevant information through various state mechanisms. Meanwhile, everyone should help prevent further flu infection and transmission. The private sector and agencies should effectively formulate H1N1 prevention measures for their organizations, report news and information transparently to instill confidence among Thais and foreign nationals, thus building understanding toward the domestic outbreak. Currently, many are concerned about risks of drug resistance and virus mutation. Meanwhile, development of the vaccine still holds questions about the final yield. An emergency plan to cope with the outbreak if it gets worse is another challenge for the government. KResearch views that the government should establish a primary center responsible for this disease to create a health safety net at all levels in communities. They should also launch measures to limit the spread to help reduce the infection and mortality rates, and assure the public that their measures are effective enough to cope with the disease.
Furthermore, this public health problem is becoming an economic risk that will challenge our economic growth targets. As a result, the government should accelerate budgetary disbursements for the public health services under the ‘Strong Thai' economic programs as urgent agenda to benefit H1N1 flu control and help bolster our economic situation.
Impact of H1N1 Flu on Thai Economy
Period
Loss (Base Case)
GDP Change (%)
July 2009
Former
Former (June 2009)
New
Total loss
Minimum loss of
THB51 billion
THB9-28 billion
- GDP in 2Q09
0.2% Drop
0.2% Drop
-5.6
-5.6
- GDP in 3Q09
1.6% Drop
0.2-0.9% Drop
-4.0
-5.6
- GDP in 4Q09
0.9% Drop
Affected slightly
2.9
2.0
Impact on 2009 GDP
0.6% Drop
0.1-0.3% Drop
-3.5
-4.1

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