Thai economy resilient to Middle East turmoil, says finance minister

The war in the Middle East will impact the Thai economy in various ways, but the economic fundamentals are stable and strong, with a financial sector flexible enough to cope with the risks posed by external volatility, Finance Minister Ekniti Nitithanprapas said today.

He said the areas likely to be impacted by the turmoil are energy and its costs, global trade, supply chains, tourism, inflation, financial and capital markets, exchange rates, and labor.

The finance minister said there are currently about 100,000 Thai nationals working in various Middle Eastern countries, and their safety and employment are at risk, adding that the Foreign Ministry and other relevant agencies are taking steps to ensure their safety.

In anticipation that the war will drive global oil prices up, impacting production costs, Ekniti said that the government has put mechanisms in place to cushion the negative effects and ensure sufficient oil reserves to meet domestic demand.

He also said that the Finance Ministry is coordinating with special financial institutions to support the liquidity of Thai exporters and importers, who are expected to be hampered by increases in freight charges and insurance coverage on goods being imported and exported.

The finance minister said tourism will be hard-hit by a reduction in tourist arrivals, flight cancellations, and closures of airspace by some countries.

Global oil price rises may place upward pressure on the costs of imports and exports and drive up inflation, he said, adding that the impacts will be moderate because inflation for the whole year is forecast at 0.3%.

Commenting on the implications for global oil supplies and prices, Thai economist Dr. Somjai Phagaphasvivat said the extent of the impacts will depend on how long the conflict lasts and the safety of the oil wells and oil installations in the Middle East.

He said oil prices have already started to increase, but wells and installations remain intact and protected by the US, adding that supplies will only be disrupted if oil wells are attacked.

He predicted that the war will continue for 2 weeks at most; otherwise, Americans and people in other countries may protest, and the costs to the US of sustaining the current level of military involvement may become prohibitive.

Dr. Somchai said the Thai government has already taken steps to ensure sufficient oil reserves to meet domestic demand for two months.