Bangkok: The Trade Policy and Strategy Office (TPSO) has analyzed the impact of ongoing tensions in the Middle East, identifying significant risks stemming from rising energy costs and inflation.
According to Thai News Agency, the TPSO predicts a potential "negative supply shock" due to threats to energy supply, particularly along key global oil transport routes. This scenario could lead to increased crude oil prices, which in turn would elevate production, transportation, and electricity costs, thereby fueling inflation both globally and within Thailand.
The Office of Trade Policy and Strategy (OTPS) of the Ministry of Commerce has assessed that the current volatile situation in the Middle East could cause a disruption in energy supply, resulting in higher crude oil prices. Even if some producers attempt to increase output, changes might not occur swiftly enough to prevent rising production expenses, transportation costs, electricity rates, and inflation.
The TPSO further indicated that although Thailand is not directly involved in the conflict, geopolitical instability could impact its economy, notably the tourism sector. A slowdown in travel from the high-spending Middle Eastern market is anticipated, with long-haul tourists from other regions potentially postponing travel plans in the short term.
The prolonged situation could also affect labor markets and domestic consumption. Income for Thai workers in at-risk areas might decline, impacting remittances and reducing purchasing power in some regions. Uncertainty may cause households to delay spending, especially on durable goods and luxury items.
Financially, tensions could lead to capital flow challenges and Thai baht volatility, complicating risk management for importers and exporters. Additionally, foreign direct investment (FDI) might be delayed if the situation fails to improve.
Regarding trade, the TPSO notes that trade with Israel and Iran constitutes a minor portion of Thailand's total global trade, limiting direct impacts. However, given the Middle East's importance as an energy region for Thailand, indirect effects through energy prices, production costs, and transportation expenses should be closely monitored.
Ms. Supajee Suthamphan, Minister of Commerce, has instructed relevant agencies to closely monitor five areas: global energy prices and logistics costs, trade route and supply chain stability, demand for Thai products in the Middle East, the tourism sector, and Thai baht volatility. These measures aim to prepare entrepreneurs for potential severe fluctuations.
The results of an afternoon meeting between the government and private sectors, led by the Prime Minister, will be closely observed to assess the situation and plan the future direction of the Thai economy.