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Floods: Losses to Thailand's economy?

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Ongoing threats with damage still preventable far greater than damage already done in this survey of flood economic impact by economists at TMB Bank.

economic damage

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BEHIND THE NUMBERS: Our soaked economy: It could have been worse by TMB Analytics


The unforgiving floods continue to sweep closer to the heart of Bangkok, having already surged through the heart of the industrial zones in Ayutthaya and Pathum Thani, the contributors of roughly 22% of Thailand's manufacturing output. The waters have entirely submerged seven industrial estates with a total investment of 314 billion baht. Now, with efforts to save central Bangkok under way, the water is being diverted east and west where more industrial zones may be jeopardised.

How much will all of this this affect the Thai economy, and more importantly, what's the thinking behind that assessment?

As of yesterday, the flooding had claimed 437 lives, affecting more than 3 million households from 63 provinces, displacing tens of thousands of people from their homes. The economic cost may seem a secondary concern for the moment.

However, the cost remains very real as foreign and domestic investors demand from the government a definite resolution to the long-term threat of flooding in industrial provinces. Or else they may move.

The Thai flood is no longer a local economic problem. Although unlikely to cause a global economic slowdown, events here have disrupted industries in which Thailand plays a significant role in the global supply chain.

Take the automobile industry for example. As the world's 12th largest vehicle producer, Thailand is well integrated with the industry's global supply chain. Just as they had begun to recover from a series of recalls and their country's devastating earthquake and tsunami, Japanese carmakers are worried anew about parts supplies and production continuity, not just in Thailand but globally. Their factories are scattered around the central plains and the periphery of Bangkok; many are located in the now-submerged seven estates. Of all the Japanese carmakers, Honda's plant in the Rojana Industrial Estate took the first and the only direct hit so far, and it may take up to six months to reopen.

However, almost all manufacturers have had to cut back production across the board. Toyota, Mitsubishi, and Ford have paused local production since early October.

The impact has been felt as far as North America as missing parts forced Honda and Toyota to curtail operations there. We view that more than 70% of Thailand's auto production is still under threat from the diverted floodwaters. 

Another key industry at risk is hard disk drives. Thailand accounts for around 25% of global hard drive output, second only to China. Together, the HDD giants have invested 65 billion baht in the past three or four years. 

Unfortunately, factories of Western Digital, the world's largest HDD manufacturer with around 60% of its total production based in Thailand, are now submerged in the Nava Nakorn and Bang Pa-in industrial estates. The same fate has befallen Toshiba, the producer around 11% of global HDD supply, whose factories are also in the Nava Nakorn and Bangkadi estates. Seagate, the second largest HDD maker, is still safe but faces enormous constraints from swamped suppliers such as Nidec and Minebea. By the end of flood, we could see more than 40% of local electronics capacity damaged

TMB Analytics has completed a preliminary assessment of the impact of the flood. However, the numbers are definitely not final, as it remains uncertain which areas in Bangkok and vicinity will be hit next. 

Some key export sectors have already been affected by the flood such as rice, the electronics and automobile industries. More industries lie in the floodways as the mass of water creeps out to sea through Samut Prakan and Samut Sakhon, which have high concentrations of food, textile, and garment makers. In the same area, Seagate still awaits its fate. We break all economic sectors into three rough geographical areas: severely flooded provinces (Ayutthaya, Nakhon Sawan, Pathum Thani and Nonthaburi), threatened or ongoing (Bangkok, Samut Prakan, Samut Sakhon and Nakhon Pathom, which produce 38% of Thai manufacturing output), and non-flooded provinces. 

So far, beverages have taken the hardest hit. The deluge may have already affected more than 60% of beverage production along its path, claiming big names such as Coca-Cola, Nestle and Oishi. However, given the flexibility of other facilities around Thailand and neighbouring countries, the effect may be short-lived after the water recedes.

Electronics have also taken a hard hit of around 30%, but the threat doesn't end there. Roughly another 13% of electronics production still lies in the path of the floodwaters.

Rice is particularly worrisome, as the flood hit the central plains close to the harvest, leaving farmers with little stock to enter the government's rice pledging programme.

Although already affected by around 10-20%, sectors such as industrial supplies, paper, textiles and apparel remain on very high alert. These industries are situated on the outskirts of Bangkok and vicinity, some right in the path of the diverted water. We do not expect the worst-case scenario will prevail (equivalent to all ongoing or threatened provinces to turn into severely flooded provinces for all sectors). The risk for some sectors is definitely there.

Let's now turn to the big picture. Current loss estimates from the authorities and private research houses put the figure at around 200 billion baht. These figures often get translated somewhat casually as a percentage of GDP. In this case, the loss is around 2% of annual GDP. This might sound like a staggering sum, but so far as economic growth is concerned, the impact might not be as bad as it seems.

Our baseline is for fourth-quarter GDP growth slowing considerably but still growing at 0.5%, assuming inner Bangkok is spared. Depressed economic growth will likely carry into the first quarter of 2012 at around 1.5%. A full recovery will start to kick in in the second quarter, reverting to growth of 4%.

This figure is more modest those of policymakers and other private think-tanks, which see contractions ranging from 1-3% for this quarter and the next.... [Read the rest of the article here].

TMB Analytics is the economic analysis unit of TMB Bank. Behind the Numbers is co-authored by Dr Benjarong Suwankiri and Naris Sathapholdeja, senior analysts at the unit. They can be reached at macro@tmbbank.com. 

(Source: Bangkok Post, BEHIND THE NUMBERS, Our soaked economy: It could have been worse, 4/11/2011, TMB Analytics, link

Economics of Natural Disasters Vocabulary

natural disaster - the effect of a natural hazard such as a flood, tornado, hurricane, volcanic eruption, earthquake, heatwave, or landslide which "leads to financial, environmental or human losses. The resulting loss depends on the vulnerability of the affected population to resist the hazard, also called their resilience. This understanding is concentrated in the formulation: 'disasters occur when hazards meet vulnerability.'" (See Wikipedia)

Ways to remain positive, be optimistic and maintain hope:

1. it could have been worse  
2. might not be as bad as it seems
3. look on the bright side  

sweep -
move quickly
sweep closer to -
move nearer and nearer quickly 
unforgiving -
a situation causing a a lot of people to experience failure and suffering (when they deserve to succeed)

unforgiving
floods continue to sweep closer to the heart of Bangkok

industrial estates - special areas for factories that have the special infrastructure they need (roads, electricity, waste disposal, etc)(See Wikipedia)

zone - an official area used for some purpose โซน, พื้นที่,  บริเวณ, เขต
industrial zone -
an official area for factories

surge - increase quickly เพิ่มขึ้นอย่างรวดเร็ว
surged
through industrial zones in Ayutthaya

submerged - completely under water จมน้ำ อยู่ใต้น้ำ
investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)

entirely submerged seven industrial estates

divert - cause to change direction เบนเส้นทางเดินน้ำ
water diverted east

jeopardise - do something that may cause failure

efforts
- the work done towards achieving some goal; people trying to accomplish something, achieve a goal ความพยายาม
efforts underway - trying to do something now (working on it now, but have not finished yet)

efforts to save central Bangkok under way, the water is being diverted east and west where more industrial zones may be jeopardised.

assessment - an evaluation, judgment or opinion; the process of making a judgment or forming an opinion, after considering something or someone carefully การประเมิณสถานการณ์
the thinking behind that assessment

the flooding had claimed 437 lives -
437 people have died due to flood-related causes

households - families or groups of people living together (economics treats this as a unit that makes decisions)

displacing
tens of thousands of people
from their homes

moment - a very short period of time; a particular time or occasionชั่วขณะ, โอกาสสำคัญ
for the moment - the situation now (may change soon)

concern - a worry, something that a person thinks about a lot ความกังวล
primary concern - the most important thing; the thing a person thinks about the most
secondary concern -  important but not the most important
a secondary concern for the moment

resolution - solving a problem
definite resolution
- a final soluition to the problem (so that it does not happen again)
demand a definite resolution -
ask for or request a final solution to the problem

threat 

domestic - within the country ภายในประเทศ
domestic investors

demand - people or consumers wanting to buy goods and services

resolution - solving a problem
definite resolution

threat
- a danger อันตราย
domestic investors demand from the government a definite resolution to the long-term threat of flooding in industrial provinces

disrupted
- interrupted and prevented from continuing smoothly by creating problems ขัดขวาง
disrupted industries - industries with factories that have had to stop production

significant
- large enough to be important or have an effect ที่สำคัญยิ่ง
role - the functrion, position or purpose that someone or something has in a situation, organisation, society or relationship บทบาท
plays a significant role - has an important part in the process or activity

vehicle producer - an automobile (car) producer
vehicle - a machine that you travel in or on, especially one with an engine that travels on roads, e.g., a car, bus, van, truck, etc. ยานพาหนะ

global - throughout the world ทั่วโลก ทั้งโลก all over the world, including the whole world
globally - throughout the world ทั่วโลก
global supply chain - all the companies and factories around the world that supply parts in the production of some complex product such as a computer, electronics or a car

integrated - combined so that they work well together; combining things of different types in one effective system ที่รวมเข้าด้วยกัน
well integrated
- combined well with
well integrated with the industry's global supply chain

recover - when the situation improves, gets better to become healthy and fit again after an illness or injury การฟื้น
recover from a series of recalls

devastating - very harmful and damaging
earthquake - a sudden shaking movement of the ground แผ่นดินไหว
devastating earthquake

continuity
- something continues to happen or exist (without interruptions or changes)
production
continuity

scattered - spread over a large area กระจัดกระจาย
scattered around
periphery of Bangkok
factories scattered around the central plains and the periphery of Bangkok

Honda's
plant in the Rojana Industrial Estate took the first and the only direct hit so far, and it may take up to six months to reopen

across the board - in every place, location, case, etc  
cut back production across the board - reduce the amount produced in every factory

impact - an effect or influence ผลกระทบ
curtail operations - reduce or stop the business (for a period of time)
the impact has been felt as far as North America as missing parts forced Honda and Toyota to curtail operations

key - important คนสำคัญ
key industry -
an important industry

risk
- danger, how likely or possible it is for a bad event that causes harm and damage ความเสี่ยง
at risk - facing dangers, in a dangerous situation

key industry at risk is hard disk drives

fate - the things that happen or will happen to someone, especially unpleasant things โชคชะตา ชะตากรรม
the same fate has befallen Toshiba - the same bad thing happened to Toshiba
awaits its fate - wait for whatever is going to happen (good or bad, don't know yet)

constraints - things that limit possible action and solutions to problems
enormous - very large, very big มหาศาล ที่ใหญ่โตมโหฬาร
enormous contraints - very big limitations to action

suppliers - companies that supplies parts to another company which uses it to manufacture other products

swamped - having too many problem or too much work to deal with at one time ที่มีปัญหามากเกินรับไหว
swamped suppliers - suppliers that have too much water (floods) or too many problems (broken supply chains)

the second largest HDD maker, is still safe but faces enormous
constraints from swamped suppliers such as Nidec and Minebea

capacity
- the amount of something that can be produced ความสามารถในการ (ผลิต) the amount that a factory or plant could produce if all the equipment was in use all the time
we could see more than 40% of local electronics capacity damaged

preliminary - the early part of some activity; not final, temporary ขั้นต้น, ขั้นแรก
preliminary assessment of the impact of the flood.

uncertain
- don't know what will happen, not 100% sure ไม่มั่นใจ
vicinity - an area near a particular place บริเวณใกล้เคียง
remains uncertain which areas in Bangkok and vicinity will be hit next. 

mass - large amounts จำนวนมหาศาล
the mass of water creeps out to sea through Samut Prakan and Samut Sakhon

garment - clothes
high concentrations of food, textile, and garment makers.

ongoing - currently happening; happening at the present moment; continuing ไม่หยุดยั้ง, ต่อเนื่อง

so far - up to now
beverage - a drink of any type (milk, fruit juice, beer) เครื่องดื่ม
so far, beverages have taken the hardest hit

flexibility - can change easily and adapt to new situations and conditions as they occur ความยืดหยุ่น
facilities
- the buildings, equipment and services provided for a particular purpose สิ่งอำนวยความสะดวก
flexibility of other facilities around Thailand

worrisome - worrying; causing worry or anxiety ซึ่งน่าวิตก
harvest - gathering fully grown crops from the field เก็บเกี่ยว การเก็บเกี่ยวผลผลิต
stock - an amount of something that you keep so that you can use it when you need it ที่เก็บไว้ในสต๊อก

Rice is particularly worrisome, as the flood hit the central plains close to the harvest, leaving farmers with little stock to enter the government's rice pledging programme.

textiles - cloth garments; fabric made by weaving or knitting (See Wikipedia)
apparel - clothes
alert - a warning to people to be prepared to deal with something dangerous การเตือนให้ระวัง การเตรียมพร้อม ตื่นตัว ระวัง
textiles and apparel remain on very high alert

situated
- located ระบุที่อยู่ ที่ตั้ง ตั้งอยู่ที่
outskirts - the areas at the edge of a city ชานเมือง
situated on the outskirts of Bangkok and vicinity, some right in the path of the diverted water

scenario - a possible situation in the future; the way that a situation may develop in the future
worst-case scenario - the worst thing that could go wrong (if everything fails)

prevail -
1. becomes the normal or common situation; 2. wins a battle (Bangkok vs. the water)
worst-case scenario will prevail

equivalent - the same as เท่าเทียมกันกับ

the big picture - a view of the whole situation, the overall situation (without focusing on the details) 

estimates - guesses of what the size, value, amount, cost, etc. of something might be การประมาณค่า
loss estimates - guesses of what the total losses are (due to the floods)

authorities - government officials; the police or people in official organisations who have the legal power to make people obey laws or rules เจ้าหน้าที่ (ตำรวจ หรือผู้มีอำนาจ)

GDP - Gross Domestic Product, the total value of all the goods and services produced by a country in one year
annual - happening once a year ประจำปี
annual GDP - GDP for the whole year
4th quarter - the last three months of the year
fourth-quarter GDP growth - the percentage increase in GDP during the 4th quarter of the year

staggering - very large
sum - an amount of something, especially money จำนวนเงิน
might sound like a staggering sum

so far as X is concerned, Y - making comment Y about topic X
so far as economic growth is concerned, the impact might not be as bad as it seems.

baseline


recovery - when the economy starts to get better after an economic downturn or recession ฟื้นฟู การฟื้นฟูสภาพ
starts to kick in
- starts to have an effect and influence
second quarter - the 4th, 5th, and 6th months of the year
reverting to -
going back to a previous situation
a full
recovery will start to kick in in the second quarter, reverting to growth of 4%

figure - an amount จำนวน

modest - not large in size or amount ไม่มากมาย fairly small, especially when compared with other things of the same type

think-tanks - an organization that does research as its main activity
private think tanks - research organizations owned by a company (for example, the TMB think tank is owned by TMB Bank)
private research houses - same as "private think tanks"
this figure is more modest those of policymakers and other private think-tanks

contraction -
economic contraction, when the economy grows at a slower rate (See Wikipedia)

simple - easy to understand; not complicated ง่าย,ไม่ยุ่งยาก, ไม่ซับซ้อน
concept - a principle or idea ความคิด
revenue - income from taxes or business activities รายได้
cash - money เงินสด
cash - money in the form of coins or notes
receipts - money received
infrastructure - the high-cost facilities that everyone in the economy shares (water, roads, electricity, trains) สาธารณูปโภค
assets - things owned, especially property and money สินทรัพย์

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