Agricultural GDP growth:
- Thailand's rainy season officially began on 1 May, but as of 16 June rainfall has been abnormally low according to the Royal Irrigation Department (RID).Thailand's main rice cultivation areas are already experiencing abnormally low rainfall, 20% below normal in the central region and 45% below normal in theeastern region. All in all, RID estimated that water available in the Chao Phraya River Basin - Thailand's major rice growing area -- amounted to only 3.819bncubic meters. It has been estimated that water levels in Thailand's four major dams are about 30% less than normal at this time of the year, enough for 36 days, notes Bank of America.
- Due to poor rainfall, the government asked farmers to postpone rice planting of 4 million rais of land (1.58 million acres) until the end of June. Naturally, this has not been popular and some farmers are asking for Bt3000 per rai as compensation, three times more than the handout given in relief payments to farmers last year. This would be difficult for the government, which has a budget to compensate for crop damage, but does not for planting delays.
- Lack of irrigated water, the government estimates paddy output will fall from 27 million tons to 21.6 million tons. The value of agricultural output lost to drought caused by El Niño could come to around Bt20bn, or 0.15% of GDP. This will adversely affect already weak consumer demand in the provinces.
- Baht should weaken further, as it continues to be overvalued in real effective exchange rate terms and Bank of Thailand wants it weaker, suggests Bank of America.
- Even though the bar for the next rate cut to materialize is now high, Bank of America believes there are non-trivial chances of a cut in the next few months. A hike is a very distant possibility in the next year.
