Economists warns of food price hikes triggered by drought

Inflation is also expected to rise due to increase in demand in response to the economic recovery and government economic stimulus measures.

The Nation

The Nation



File photo of a curve depicting inflation on a field ruined by drought. PHOTO: THE NATION

August 3, 2023

BANGKOK – Drought caused by the El Nino phenomenon could cause the prices of foods to rise, several economists said on Wednesday.
The chief of CIMB Thai Bank’s research office, Amornthep Chawla, said food shortage is worrisome as it could trigger a rise in global food prices.

India has suspended its export of rice, he said, adding that the price of rice and other agricultural products could rise further amid difficulties in farming.

“It is necessary to check if the new Thai government would allocate a budget or launch measures to freeze product prices,” he said.

He added that the new government should alleviate the sufferings of farmers and low-income people, as they would be affected by rising food prices more than the others.

Even though rising food prices would not have a huge impact on inflation, Amornthep expects inflation to go up due to increase in demand in response to the economic recovery and government economic stimulus measures, such as the measure to increase the minimum daily wage.

This year, we expect Thailand’s gross domestic product (GDP) to expand by 3.3% on tourism growth, he said. However, farmers would be affected by inflation and deny them a better quality of life, he added.

Somprawin Manprasert, chief economist at Economic Intelligence Centre (EIC), said rising food prices could impact food security.

Even though Thailand can grow rice, he said the country could be affected by rising prices of processed products, such as bread.

He added that inflation would not drop sharply as food accounted for 38.2% of overall inflation.

People’s purchasing power could be affected by rising cost of living, he said, adding that those having income less than 15,000 baht per month would suffer the most.

He expects Thailand’s economy to face various challenges next year due to a decline in economic expansion because of interest rate hike, drought and food shortage.

Thailand’s economy is expected to expand by 3.6% next year compared to this year’s expectation of 3.9%, he added.

Burin Adulwattana, chief economist of Kasikorn Research Centre, said many people were concerned about food shortages triggered by the El Nino phenomenon.

He expects the uncertainty to persist until next year, as food shortage could lead to increases in the prices of products. He added that people should be wary of drought next year, as it could affect Thailand’s rice productivity.

“Even though India is the only country that had suspended rice exports, it had caused panic among people,” he said.

Phacharaphot Nuntramas, chief economist of Krungthai Compass, said food shortage was still not a worry because some countries were able to export foods.

However, he expected the food shortage to trigger inflation in the latter part of this year if the drought situation worsened, adding that the price of fresh foods would rise.

The vice chairman of the Thai Chamber of Commerce, Wisit Limluecha, said the food industry is facing multiple challenges from the economic slowdown, inflation, rising fuel price and the El Nino phenomenon.

He expects the economic slowdown to worsen in the second half of this year, adding that many countries were affected by inflation, especially low- and middle-income countries.

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