Distinguished figure Wisit Limluecha, holding elite positions as the vice chairman of Thai Chamber of Commerce (TCC) and the seat of the chairman at the Processed Food and Future Food Committee (PFC) of the Federation of Thai Industries (FTI), has voiced his concerns about the future of the prolific food industry. He indicates a foreseen encounter with a sequence of potential risks and challenges. These encompass economic stagnation, inflation, surging oil prices, and the wide-ranging rippling effects of the famous climatic event, El Nino.
Surprisingly enough, despite the gloomy horizon, the inflation outlook in the ‘Land of Smiles’, at least for the third quarter of 2023, is forecasted to stay fairly low. However, a contradictory scenario unfolds in the food arm of the Thai market with prices moving northward, owed significantly to drought instigated by the El Nino effect. The spectrum of increased costs encircles household essentials like vegetables, fruits, eggs and milk. From the viewpoint of the Commerce Ministry, the general inflation is estimated to mildly settle between 1-2% to co-align with the economic state during the latter half of the year. In contrast, the three major economic powerhouses of Thailand – TCC, FTI and a few others, stubbornly hold on to their inflation forecast for the ongoing calendar year, adamant at 2.2-2.7%.
Insights of attractive comparison emerged when an inflation rate contest was held on the domestic front vis-a-vis other global players in May. Thailand proudly stood its ground as one of the nations possessing the most moderate inflation in ASEAN, resting at 3.37%. Notably though, the tangible state of affairs may drastically fluctuate given the relentless multitude of international conflicts, looming shadows of worldwide economic slow-down trends, and an increasing tally of state measures. Piling onto this is the eventuality of more intense droughts than earlier projected.
Moving the focus on a broader, international stage, rising inflation rates are gradually diluting the purchasing prowess of households worldwide. Consequently, consumers are burdened with the need to loosen their purse strings a bit more to afford products, thereby curtailing non-essential buys. This train of events collides head-on with the livelihoods of those inadequately equipped to match the pace of escalating costs, pressuring them to curtail their expenditure. This trend could provoke a significant tumble in all-round business operations, more so, in the food industry amongst others. Such a domino effect poses an extraordinary strain on Thailand’s food industry already grappling with inflation.
Specifically on the home-front, Thai consumers, predominantly the lower and mid-range income clusters, are witnessing a weakening influence on their purchasing strength as inflation races ahead. The repercussion of this effect percolates into the homeland’s food market – especially non-obligatory food items, spelling potential adverse impacts for the food industry.
Switching the spotlight onto the production end, the black sheep comes in the form of rising interest rates. This essentially sabotages nearly all fragments of production in the food industry. The degree of damages incurred is largely influenced by the breed of product produced, the size of the business, among other parameters. This increasing-cost epidemic mercilessly strikes at the sub-industry group, with a whopping majority (over 98%) restricted to MSMEs and SMEs.
Further adding to the menu of concerns, worldwide oil prices have notched up continuously for the fourth week running. The price of the benchmark Brent crude oil ascended by 25 cents or 0.3% to firmly establish at US$82.99 per barrel.
Rocketing oil prices sow the seeds of inflation and the resultant enhanced inflation speeds up the setting of interest rates. Given its widespread application in transportation and production of numerous goods, exceptionally high costs will push product prices up. This, in turn, kindles inflation and hampers consumer purchasing power, thus heaping further misery on families already drowning in mounting debts. This scenario could potentially crank up the volume of bad debts and hinder the nation’s overall economic revival attempts.
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