The Thai economy is suffering the worst drought in half a century. It’s already caused a loss of US$2 billion according to a survey by the University of the Thai Chamber of Commerce (UTCC).

“Thailand’s economy might expand by less than 3%, compared to a previous growth projection of 3% to 3.5%,” said Thanavath Phonvichai, director of the UTCC’s Economic and Business Forecasting Centre.

A survey of 1,200 Thai farmers found the drought is impacting over 92.2% of them. In other words, just 7.8% of farmers are unscathed.

Rice is one of the top exports in Thailand, but the drought severely harmed yields. Around 4 million acres worth of rice farmland face damage. This number amounts to 15% of the nation’s total farmland.

Most importantly, this drought comes at a time when the Thai economy is already fragile.


Desperate for Water

Thailand is contending with drought conditions in seven out of 67 provinces, according to the National Disaster Warning Center. Almost a third of the country needs to ration water – even during the wet season.

Meanwhile, some main reservoirs are at their lowest levels in two decades.

To the untrained eye, Thailand’s drought is deceptive. Across much of Suphanburi province, just north of Bangkok, many fields seem green and crop-filled.

“The color is wrong. It’s too yellow” explains Samien Hongto, the spry 72-year-old chairman of the Central Farmers Network, as he surveys rice fields near his village.

We can see the severity of drought in Suphan Buri, 103 km from Bangkok, where farmers fight over the Tharakam canal. The canal is the last resort of hope to the farmers with all their crops dying.

This canal has pitted locals against each other. Villagers upstream are hoarding its precious water to save their crops. Government requests to stop unauthorized pumping of canals are unrealistic and water rationing is unsustainable, farmers say.

To help farmers, officials are trying to clear irrigation channels, dig more ground wells, and use cloud seeding technology to create artificial rainfall.

Meteorologists forecast drought-hit regions will have some rain before August. But with Thailand’s debt problems getting worse, it’s still unclear whether farmers can even survive that long.


Political Implications for Thailand Economy

With Thailand’s vital rice belt being battered, the already weak economy suffering, and regional competitiveness sagging, the junta’s Achilles’ heel has been shown.

In May 2014, Thai generals promised to restore order and prosperity. This was after months of street protests brought the country to a standstill.

Calm was restored, but the Thailand economy is still in a rut.

Post-coup gains of a rebound in tourism and increased fiscal spending have been offset by disappointing exports, declining manufacturing and weak local demand.

A poor rice harvest is more than just an economic headache for the junta – it is a political dilemma. This is especially the case since most rice farmers in Thailand hail from the populous north where love for the ousted Shinawatras remains strong.

Back in 2011, the government of then-Prime Minister Yingluck Shinawatra bought billions of dollars worth of rice from farmers at above-market prices. This bought popularity among rice farmers, yet eventually backfired and hit economic growth hard.

However, the failed crop harvests also erodes crucial support among some of the military’s natural allies. This is because they add to an already negative outlook on the Thailand economy.

The junta is extremely vulnerable to economic downturns because such issues could lose them support from the Bangkok-centered upper class. This is the only group in Thailand which supports the junta.

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About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's an accomplished stock trader and property investor in Thailand, Cambodia, and many other places. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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