BANGKOK (Reuters) - Thailand’s worst floods in half a century have killed nearly 400 people since mid-July, damaged millions of tonnes of rice and forced a series of industrial estates to close.
The government, central bank and economists have slashed their economic growth forecasts for the year. Rebuilding could require billions of dollars and it will take months for some manufacturing operations to be up and running again.
Below is a summary of the impact on Southeast Asia’s second-largest economy and how the government is responding.
The central bank slashed its 2011 economic growth forecast to 2.6 percent from 4.1 percent on October 28, with the economy likely to shrink 1.9 percent in the fourth quarter from the previous three months. It said it might review the forecasts again in November.
The cost to the economy could go far higher if Bangkok, which accounts for 41 percent of GDP, is swamped.
UBS has cut its fourth-quarter growth forecast to just 0.2 percent compared with a year before, down from 3.3 percent.
The Thai Chamber of Commerce has estimated the flood cost at 250 billion baht ($8.2 billion) and said it would take about three months for business to recover.
Kasikorn Research has slashed its 2011 growth forecast to 1.7 percent from 3.8 percent. Credit Suisse puts it at 2.7 percent and UOB Bank 3.0 percent.
Inflation rose to 4.19 percent in October — well below the 4.5 percent forecast by economists but food prices were almost 10 percent higher than a year before.
The floods have forced seven big industrial estates north of Bangkok to close, affected at least 9,859 factories and 660,000 jobs.
The electronics and car sectors have suffered; Thailand is a regional hub for the world’s top car producers, and even if most of the big assembly plants are in the east, away from the floods, car part firms have been hit.
Firm such as Toyota Motor Corp and Honda Motor Co have scaled back production at plants as far away as North America.
Honda, whose assembly plant has been flooded, said this week it did not know when car production would resume in Thailand. Nissan Motor Co said on Wednesday it might restart production from November 14.
Some tech firms are starting to make plans to reopen in a few weeks, although the picture varies greatly.
Stars Microelectronics (Thailand) Pcl, for example, says it hopes to restart some production lines at its hard drive part plant at Bang Pa-in estate in Ayutthaya province on December 1.
Thailand is the world’s second-biggest maker of hard disk drives. World prices are rising because of the disruption in Thailand and computer makers such as Lenovo Group Ltd have said they expect hard drive supply problems through the first quarter of next year.
The Commerce Ministry expects exports to fall 13 percent in the fourth quarter from a year earlier.
Thailand is also the world’s biggest rice exporter and the government has estimated that it could lose a quarter of its main crop due to the floods. Harvesting of the crop began in October and the government says output could be 19 million tonnes of paddy rather than 25 million.
Some Thai rice exporters may be obliged to declare force majeure if the situation gets worse, although none appear to have done so yet.
Tourist arrivals in the fourth quarter are expected to drop as much as 20 percent below the 5 million target at a cost of about 20-30 billion baht, according to Kongkrit Hirankij, head of the Federation of the Thai Tourism Industry.
Tourism Minister Chumphol Silpa-archa has said arrivals could be up to 1 million below the government’s target of 19 million this year.
Don Muang airport, used by budget airlines for domestic flights and by private planes, has been closed since October 25. The main international airport, Suvarnabhumi, is still open.
At least 482 bank branches, including around 200 in Bangkok, have been forced to close.
The government has said it could spend more than 100 billion baht on getting the industrial estates back into shape.
Deputy Prime Minister and Commerce Minister Kittirat Na Ranong said on Tuesday the government would need to borrow “hundreds of billions of baht” for repairs and to prevent a repeat of the disaster during the annual rainy season.
The cabinet agreed in October to a 10 percent cut in current state expenditure, some 80 billion baht, in the fiscal year from October 1 to help with the cost of the floods.
It also approved an increase in the budget deficit to 400 billion baht ($13 billion) from 350 billion plus a 325 billion baht package to help firms, small vendors and individuals through soft loans to be arranged or partly guaranteed by the government.
The government has said it will give flood-affected households up to 30,000 baht each ($974).
It will also consider tax breaks for affected companies.
It has relaxed import tariffs and regulations to let in more imports of food, water and consumer products that are in short supply.
The Bank of Thailand (BOT) decided to leave its policy rate unchanged at 3.50 percent on October 19, pausing after more than a year of tightening.
Its next scheduled meeting is on November 30 but it has said it is ready to call a special meeting if needed. Most economists expect it to leave rates unchanged until next year but some say the chances of a cut have grown.
The central bank is working with the Bank of Japan on a scheme under which it would lend baht funds to Japanese firms affected by flooding, using Japanese government bonds as collateral. It is in talks with authorities in the United States, Britain and Europe on similar schemes.
(Sources: Reuters, government information)
Compiled by Orathai Sriring; Editing by Alan Raybould