THAILAND could face a delayed economic recovery plus disruption to exports, investment and tourism should North Korea-US tension escalate into a full-fledged war, market analysts warned.
While the belligerent rhetoric is |a cause for concern, people need |not panic, according to Pipat Luengnaruemitchai, assistant managing director at Phatra Securities. The situation carries risks, so investors should prepare for the potential fallout, he said.
The stock market has remained resilient, closing at 1,561.31 – or down just 0.66 per cent – on Friday, partly because it has not yet reached an all-time high.
The surging Dow Jones and Nasdaq, on the other hand, fell sharply in Thursday trading as investors worried about the impact of the political crisis. Gold, meanwhile, increased sharply as investors took refuge in the safe-haven asset.
US President Donald Trump has engaged in a war of words with North Korea, warning it would be met with “fire and fury and … power, the likes of which this world has never seen before”. North Korea then said it planned to strike at Guam Island, a US territory in the Pacific Ocean.
The market considers both Trump and North Korean leader Kim Jong-un unpredictable, said Pipat.
Should war break out, it would potentially impact the flow of trade in the region and would surely impact the Thai economy. Tourism would also be affected and the worst-case scenario would also see a delay in the recovery of Thailand’s economy. The Thai government has projected export growth of five per cent this year and an increase in gross domestic product of 3.5 per cent, up from 3.2 per cent last year.
Kobsithi Silapachai, head of |capital markets research at Kasikornbank, agreed that if war broke out it would disrupt investments flows worldwide. The impact on information technology would be particularly acute, he warned, as South Korean investors are major producers of computer chips used in computers, smart phones and other electronic products.
The fallout of a conflict could be similar to the effects of the floods that hit Thailand in 2011, when the global supply of hard drives was disrupted due to the country’s large disc drive industry, he said.
As Japanese and Korean investors are major investors in Thailand and Southeast Asia, war could disrupt investment in the region.
Thailand only has small trade with North Korea but Japan is Thailand’s third largest trade partner and South its 15th largest. Should North Korea fire missiles at South Korea and Japan, key alliances of the US, the impact on Thailand would be significant.
The Prime Minister’s Office Vice Minister, Kobsak Pootrakul, played down the likely impact of a conflict.
There may be a short-term shock but the market would soon recover, he said. Even if the tension escalated, Kobsak did not envisage a prolonged war.