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27 Oct 2011

Thai Economy

Flooding in Bangkok: 4Q11 Economy Shrinking 3.3%, 2011 GDP Up 1.7% (Business Brief No.3194)

The severe inundation that has caused unprecedented economic losses is worsening. More damage is expected, especially along floodways draining out to sea. It is becoming increasingly apparent that none of areas in Bangkok will be spared. Meanwhile, a close watch is needed at seven industrial estates located along floodwater diversion routes east of Bangkok linked to Chachoengsao and Samut Prakan, which are now at risk of becoming submerged. KASIKORN RESEARCH CENTER (KResearch) has estimated economic losses based on two scenarios:
wBase Case: Average floodwater depth in Bangkok of 50 cm., and a period of flooding of 30 days require until sometime in November for completion. Industrial zones east of Bangkok may be partially affected.
wWorst Case: Average floodwater depth in Bangkok of 80 cm., and a period of flooding of 45 days require until sometime in December for completion. Industrial zones east of Bangkok may be severely affected.

KResearch forecasts that this natural catastrophe may cut into our GDP by THB242 billion in our base-case, but reach a staggering THB330.80 billion or 2.3-3.1 percent of GDP in the worst-case. The industrial sector would be the most affected, totaling THB171.90-234.90 billion (over 70 percent of the total losses).
As a consequence, the Thai 4Q11 GDP performance would be cut by 3.3 percent in our base-case, or as much as 6.3 percent in the worst-case scenario, versus our earlier forecast of 4.9-percent growth. We at KResearch have therefore revised downward our 2011 economic projection to 1.7 percent growth in our base-case, and 0.9 percent growth in our worst-case, compared to our previous forecast of 3.8-percent growth.
Economic Impact from Flooding
Base Case
Worst Case
Average Floodwater depth in BKK (cm.)

Coverage (Affected Area, % of BKK)

Period of Flooding in BKK (Days)

Economic Losses (THB Million)

- Agriculture

- Industry

- Services and Others

Impact on GDP

- Impact on 3Q11 GDP

3Q11 GDP Growth

- Impact on 4Q11 GDP

4Q11 GDP Growth
- Impact on 2011 GDP

2011 GDP Growth
Source: KResearch as of October 26, 2011 (previous forecast September 16, 2011)

Looking ahead into 2012, KResearch forecasts that the Thai economy would grow around 4.3 percent. Our production and exports may continue to contract through to 1Q12, and consumption may be pressured by flood-related unemployment. Under such circumstances, our GDP may fall into negative territory in 1Q12 before resuming growth in 2Q12. Government spending for flood victim rehabilitation, investment expenditures for reconstruction of buildings and basic utilities as well as reinforcement of flood control infrastructure by the government, businesses and the general public, plus a low base comparison vis-à-vis 4Q11 should help cushion adverse economic impacts thereafter.

Thai Economy