Higher inflation and a sluggish economy are looming this year following the Russian invasion of Ukraine, says the Federation of Thai Industries (FTI).
The Russian attack on Ukraine drove energy prices higher and led to sanctions from the US and its allies. Thailand is still struggling to recover from the downturn caused by the pandemic, said FTI vice-chairman Kriengkrai Thiennukul.
He said the domestic economy may not reach the growth target of 3-4.5% this year set by the Joint Standing Committee on Commerce, Industry and Banking.
Russia is a major gas exporter. One-third of gas supply to European countries comes from Russia.
If gas delivery is disrupted, heavy industries in Europe will be affected, which will affect supply chains globally and in Thailand, said Mr Kriengkrai.
If sanctions cut off Russian banks from the Society for Worldwide Interbank Financial Telecommunication, known as SWIFT, the Thai export sector may bear the brunt, he said.
Thailand-Russia trade stands at around 3 billion baht and Russia is a major tourism market for Thailand, with 1.5 million visitors a year before the pandemic, according to the FTI.
Chaichan Chareonsuk, chairman of the Thai National Shippers' Council (TNSC), said the Russia-Ukraine confrontation may have a negative impact on the global and Thai economies, especially in terms of higher production costs fuelled by rising energy and raw material prices such as steel, cereals and semiconductors.
The TNSC is maintaining its export growth projection of 5% this year, assuming the conflict does not last long or extend beyond the two countries.
"The council expects Thai outbound shipments to grow strongly, by as much as 8% in the first quarter, thanks to advance purchase orders," said Mr Chaichan.
"If the fighting becomes prolonged, Thai exports in the second quarter may be affected, with purchase orders estimated to drop by US$4-5 billion mainly for automobiles and parts, rubber products and electrical appliances."
Some Thai products such as rubber products are likely to benefit if the conflict is prolonged because they can serve as a substitute for Russian or Ukrainian rubber products in the global market, said Commerce Minister Jurin Laksanawisit.
Russia, for instance, exports about $170 million worth of rubber products to the US, he said.
