How would Thailand 's agricultural sector navigate through the erratic rainfall?
SCB EIC proposes 2 approaches along with 3 mechanisms to enhance water security for Thailand’s agricultural sector.
Thailand has grappled with both droughts and floods over the recent years.
Thailand witnessed a series of extreme weather events throughout the year in 2023. During Jan-Aug, many regions faced below-average rainfall attributed to the El Niño phenomenon. In contrast, the subsequent two months (Sep-Oct) experienced a considerable upswing in rainfall brought by the monsoon trough, which helped mitigate the impacts of El Niño. These unusual rainfall patterns resulted in a severe drought in early 2023, followed by substantial floods towards the end of last year.
“Droughts and floods” will result in agricultural loss of around THB 50,000 million, particularly in Central Thailand.
The agricultural sector is highly vulnerable to variations in water levels, as either insufficient (drought) or excessive (flood) water can disrupt overall plant growth and productivity. Based on SCB EIC assessment, the combined impact of “droughts and floods” in 2023 will result in agricultural loss of at least THB 51,700 million—comprising THB 19,300 million in 2023 and THB 32,400 million in 2024. Sugarcane will bear the most significant damage, followed by off-season rice, in-season rice, and cassava. In terms of regional impacts, the Central part will suffer the highest loss, followed by the Northern, Northeastern, and Southern regions.
Erratic weather menaces the Thai economy and exacerbates inflation risks.
The damage incurred to the agricultural sector in 2023 and this year affect Thailand’s economic growth and inflation. SCB EIC assessed that direct impacts on Thai agriculture and indirect effects linked to other sectors will shrink Thailand’s economic growth by -0.34 percentage points (pp) compared to the base-case scenario without “droughts and floods.” This can break down to -0.13pp and -0.21pp in 2023 and 2024, respectively. Besides economic damages, extreme weather could also drive a surge in crop prices and heighten inflationary pressures in 2024. In particular, the escalating prices of sugar and rice will likely contribute to a 0.3pp increase in inflation this year through second-round effects from higher ready-made food prices (prepared food at home and food away from home).
2 Approaches and 3 Mechanisms to Enhance Water Security in the Agricultural Sector
Unprecedented damages caused by droughts and floods underscore the alarming threats of rising global temperatures. This year and beyond, Thailand will be at risk of further challenges from droughts and flooding. To proactively address such challenges, SCB EIC proposes 2 approaches along with 3 mechanisms to enhance water security for Thailand’s agricultural sector. 1) Improve Water Supply Management Efficiency by enhancing water infrastructure with a short-term focus on small-scale water storages such as ponds, and a long-term focus on large- and medium-scale reservoirs as well as water distribution systems. 2) Improve Water Use Efficiency (Demand) through measures to conserve soil moisture, modify irrigation systems, and enhance crop cultivation practices, such as adjusting crop planting schedule—all of which can be implemented as immediate measures in the short term.
Successful implementation of the 2 approaches requires robust support from 3 mechanisms: (1) Policy Mechanism including the enforcement of the organic laws under the Water Resources Act, higher budget for water infrastructure development, and R&D funding in water technology; (2) Financial Mechanism such as facilitating credit access for farmers seeking to enhance water management and developing crop insurance systems; and (3) Data Mechanism by harnessing digital technologies for effective data collection, connection, and analysis to enhance water management efficiency.
The success of these approaches and mechanisms lies on collaborative efforts among stakeholders, including the government, private sector, civil society, and farmers. Active contributions from stakeholders to fortify water security will help Thailand's agricultural industry stay resilient and sustainably thrive in the face of intensifying climate change hazards.
