Thailand is preparing contingency plans to deal with a potential drought that could last years and squeeze global supplies of sugar and rice. 

Rainfall across the nation may be as much as 10 per cent below average this monsoon season, and the onset of the El Nino weather pattern could lower precipitation even further over the next two years, according to government officials. 

Thailand is set to face widespread drought conditions from early 2024, the authorities have warned.

The dire outlook has prompted the Thai authorities to ask farmers to restrict rice planting to a single crop to conserve water, and sugar producers see output falling for the first time in three years. 

A drought is certain to fuel inflation in the South-east Asian nation as vegetables, fresh food and meat get pricier on reduced harvests and more expensive animal feed.

Prime Minister Prayut Chan-o-cha has asked state-run power utility Electricity Generating Authority and the Office of the National Water Resources to help draw up contingency plans to conserve water.

So far in 2023, the nation’s rainfall has been 28 per cent below that during the same period in 2022, according to official data. 

El Nino can lead to drier conditions in parts of Asia and Africa, and heavy rain in South America, damaging a wide range of crops globally. 

Previous El Ninos have resulted in a marked impact on global inflation and hit gross domestic product (GDP) in countries from Brazil to India to Australia.

Thailand is seeking to nurture a rebound in economic growth that is already facing headwinds from a slowdown in China, the nation’s largest trade partner, and a prolonged drought may scupper efforts to keep inflation under check.

Thailand has already grappled with record heat in 2023.

“El Nino will pose a bigger worry on growth than inflation,” said Mr Euben Paracuelles, an analyst at Nomura Holdings. “Thailand is a large food exporter, with only half of total output consumed domestically. So the buffers could help limit the near-term inflation impact, alongside government price controls and subsidies.”

If El Nino turns severe, it could shave 0.2 percentage point off GDP in 2023 because drought conditions could coincide with seasonal production in the second half, especially for rice, he added. 

The central bank forecasts that Thailand will clock GDP growth of 3.6 per cent in 2023, accelerating from 2.6 per cent in 2022.

Power demand in the country hit a record in April when some regions saw all-time high temperatures, forcing companies and households to increase the use of air-conditioning to escape the sweltering heat.

The bigger, global impact from below-average rainfall in Thailand will be the hit to crops like sugar and rubber, and could even threaten the nation’s position as the world’s second-biggest supplier of rice. Shipments tumbled a third to 7.6 million tonnes in 2019, the first year of the previous El Nino. 

Sugar cane is a sturdy crop, but the nation’s millers have forecast a decline in output. That will cut the supply to the world market and further fuel a rally in refined sugar prices that are hovering around a decade-high.

The nation produced about 11 million tonnes of sugar in the 2022-2023 season and is estimated to have exported 80 per cent of its output. 

Thailand’s lack of long-term mitigation efforts to deal with floods and droughts will likely aggravate the impact of extreme weather on the nation, according to the World Bank. 

“The frequency of floods and droughts and the high human and economic cost associated with them make climate change adaptation and water management important in Thailand,” said Mr Fabrizio Zarcone, the World Bank’s country manager for Thailand. 

“A more robust framework prioritising risk mitigation planning, investing in water resources infrastructure, and managing land and water use is needed.” 

Source - https://www.straitstimes.com