Drought to shrink GDP growth

Economy March 25, 2016 01:00

By The Nation

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THIS YEAR’S drought is expected to cut 2016 economic growth by 0.85 percentage point, and could cost the agricultural and business sectors Bt119.28 billion, according to the University of the Thai Chamber of Commerce’s Centre for Economic and Business For

However, the centre expects the government’s economic stimulus of Bt60 billion to Bt100 billion to sustain the economy during the drought.

Thanawat Polvichai, the centre’s director, said that based on recent surveys, the drought, which could last until June, was expected to lead to losses of Bt119.28 billion in farm income and business earnings.

The business sector is expected to suffer Bt41.42 billion in direct and indirect losses, and the agricultural sector Bt77.86 billion.

In a survey of 1,200 respondents in the agricultural sector from March 7-16, about 58 per cent thought this year’s drought would be more severe than last year’s.

The North and Northeast experienced the most adverse effects, leading to increases in production costs, the cost of water resources, household debts and daily spending. Meanwhile, production and farm income dropped.

Farmers expect the drought to end in June.

However, the government is expected to sustain the economy during the drought with its Bt70-billion Ban Pracha Rath project and other stimulus measures.

According to the survey, 82.1 per cent of farmers had made adjustments, such as changing their occupation to trade activities, making crop changes, reducing the growing period, relocating to work in the cities, and participating in state projects.

However, the remaining 17.9 per cent made no adjustments, either because their farms were in the irrigation areas, they doubted the drought would be too severe, or other reasons.

The farmers surveyed urged the government to provide assistance in water sources, agricultural prices, stabilising farm incomes, household debts, high production costs and underground debts, in that order.

“More than 70 per cent of the farmers surveyed conceded that they could barely cope with the drought, or not at all, because of their debt repayments in the formal system, production costs, utility expenses, [other] spending and underground debts,” Thanawat said.

About 55.7 per cent of farmers who responded to the survey have debts in the formal system and 42.3 per cent underground system. Their debts average Bt167,452 per household.

Based on a recent survey on 400 business operators, they were feeling the most impacts from the country’s economic conditions, followed by drought, exchange rates, business confidence and interest rates, in that order.

About 25.9 per cent of the business operators surveyed were directly affected mostly by the drought and 69.6 per cent indirectly. They indicated that they could sustain their businesses amid the drought until at least August, and some up to October.

The business operators surveyed wanted the government to establish a mechanism or a contingency plan to deal with the drought, followed by sustainable water and dam management, improved farm income and extension of debt schedules.

In another survey of 180 representatives of state and private agencies in the agricultural and economic sectors across the nation from March 9-18, the drought was estimated not to last too long, probably until May or June.

The drought was not affecting the economy at the provincial level, with little impact on production activities, they said.

Overall production of farmers and income from sales of agricultural products had fallen a bit, but most prices either did not change or rose somewhat.