Ongoing tensions in the Middle East are exerting significant downward pressure on Thailand's economy through three primary channels: a contraction in tourism, disruptions to exports, and rising energy prices.
According to calculations by the University of the Thai Chamber of Commerce (UTCC), if the Middle East tensions persist for three months, Thailand's GDP growth rate for this year could be nearly halved from the previously forecasted 2%. In 2024, Thailand's economy grew by 2.4%.
Under a more pessimistic scenario, if the conflict continues for six months, the growth rate decline could widen by 2.3 percentage points, potentially pushing the economy into contraction. This would mark Thailand's first annual negative growth since the COVID-19 pandemic in 2020.
Beyond the downside risks to economic growth, the institution also warned of rising fiscal pressures. The government may need to allocate over 70 billion Thai baht (approximately $2.2 billion USD) to offset the impact of rising energy costs.
Tourism is the first sector to be affected, with Phuket hotel bookings already seeing a 20% cancellation rate.
Tourism is considered the most direct transmission channel for this shock. Thailand initially aimed to attract 36.7 million foreign tourists this year. However, with European and Middle Eastern tourists accounting for about a quarter of total arrivals, achieving this target faces increasing challenges as travelers from these regions cut back on plans.
The European tourism market is seen as particularly vulnerable. As European flights heavily rely on transit routes through Middle Eastern hubs, regional instability is causing flight disruptions and significant airfare increases. This could lead to a substantial evaporation of booking demand during peak travel seasons like Easter.
A survey among members of the Thai Chamber of Commerce revealed that the southern region, famous for its beaches and nightlife—especially Phuket—has already recorded approximately 20% cancellations of hotel bookings, primarily from European tourists. Simultaneously, local businesses are reporting rising logistics costs.
Exports and energy face dual pressures, with the automotive and machinery sectors being especially vulnerable.
The impact is not confined to tourism. Shipping disruptions have already affected Thai export routes via Europe. Industries with higher dependence on European and Middle Eastern markets, such as automobiles and machinery, face greater spillover risks.
Concurrently, rising energy prices are being passed on to businesses, further increasing production and logistics costs. The UTCC warned that if tensions persist for three months, the required government fiscal expenditure to subsidize energy costs would exceed 70 billion Thai baht, placing additional strain on an already constrained budget.
Amid the叠加 of these multiple factors, Thailand's already modest growth expectations for this year are under pressure to be revised downward further, while the policy response options available to authorities are also limited.
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