El Niño brewing a new crisis for Thai economy next year

Thailand is staring at the dire consequences of the El Niño phenomenon and below-average rainfall on the economy as well as the wider impact on society, many experts have warned.

Water levels in dams across the country remain low despite the recent flash floods that inundated Nan province, and both local and international experts believe that an intensifying El Niño may drag into the first half of 2027.

“El Niño may peak by the end of the year, while the time-lag impact on Thailand will stretch into March–May next year,” says Witsanu Attavanich, an Assoc Prof of Economics at Kasetsart University who closely monitors weather patterns and their economic impact.

Thailand has entered the rainy season, so people may not feel much of an impact now, but severe consequences will be felt next year, he warns.

Global warnings on El Niño

The UK Met Office, the UK’s national meteorological service, recently warned that the El Niño situation developing over the Pacific Ocean is likely to be the strongest in living memory.

The powerful natural climate phenomenon pushes up global temperatures and increases the risk of extreme weather, according to BBC News. Combined with human-induced climate change, the Met Office warns that it is “very likely” to make 2027 the hottest year on record globally.

There is growing evidence that weather patterns worldwide are already affected, bringing below-average monsoon rains to India and suppressing Atlantic hurricane activity. Prof Adam Scaife, head of long-range forecasting at the UK Met Office, warned “this is an unprecedented event”, BBC quoted him as saying.

El Niño is a naturally occurring weather pattern that happens about every two to seven years and lasts for around a year. Trade winds that typically blow from east to west across the Pacific Ocean weaken or reverse, allowing warm water to spread eastwards. Heat released from the ocean into the atmosphere lifts global temperatures and alters rainfall patterns.

Agricultural and labor market risks

With the El Niño phenomenon expected to intensify into a “Super El Niño” by late 2026, several regions in Thailand are experiencing drought due to decreased rainfall and extended dry spells. An agricultural disaster report for April 1 to July 9, 2026 shows drought has already hit five provinces, affecting 8,646 rai (around 3,418 acres) of farmland and 4,453 farmers.

“Several areas have experienced drought, which is expected to continue through the first half of 2027. This could affect agricultural production, household income and labor demand, potentially forcing some workers to move to other sectors,” says Danucha Pichayanan, secretary-general of the National Economic and Social Development Council (NESDC), a state think tank, in Thailand’s social outlook for Q2 2026.

A study by Krungthai COMPASS projects that the impact of El Niño will be felt into the first half of 2027, potentially causing up to 62 billion baht in damage to the agricultural sector.

Rice is expected to be the hardest hit, accounting for approximately 43 billion baht of total losses. Agricultural income in 2026 is projected to decline by about 8.0 per cent, reducing demand for labor and accelerating worker shifts into other economic sectors.

To mitigate these impacts, Danucha suggested promoting crops that need less water and have strong market demand, as well as developing drought-tolerant crop varieties alongside enhanced water management efficiency.

Socio-economic and environmental impact

Witsanu expressed concern over El Niño’s broader impact on agriculture, tourism and manufacturing. After the rainy season ends in late October, northern provinces could face wildfires and severe air pollution, which would adversely affect tourism.

“The poor will suffer the most should temperatures soar. Those who do not have air-conditioning will face health risks; El Niño will expose economic inequality in the country,” he notes. Higher electricity bills will add to the burden on average Thai families, while water shortages could affect agriculture, manufacturing and households.

Water management policy

Witsanu suggests that authorities look at pricing water usage to ensure long-term efficiency.

“Government agencies have been preoccupied with water supply management; they should shift to demand management,” he says, pointing out that Thai businesses and farmers pay very little or use water for free, leading to wasteful consumption of limited resources.

Meanwhile, the Royal Irrigation Department recently pushed forward with the Khlong Wang Tanod reservoir project in Chanthaburi province to secure water for the eastern industrial and agricultural zones.

Environmental NGOs and conservation groups strongly oppose the plan due to potential ecological damage, and challenge the use of protected forest land pending court approval.

Assoc Prof Adis Israngkura, an expert in environmental economics and public policy at the Graduate School of Development Economics, National Institute of Development Administration, shares Witsanu’s view, stating that the reservoir project in Chanthaburi should not be built due to its potential impact on forests and wildlife.

Instead, he suggests pipeline projects to transport water from upstream rivers to a network of storage ponds near eastern industrial estates or fruit plantations.

“Water fees should be collected from farmers and businesses in order to mobilize funds for that kind of project,” he adds.

By Thai PBS World’s Business Desk