Effect to hit real sector in waves

Kobsak Pootrakool, senior executive vice-president and chief economist at Bangkok Bank, said at this early stage the conflict has mainly affected global asset prices, but the impact has not yet reached the real sector.

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Airfares are expected to rise as oil prices jump based on the war in Iran.

(SOMCHAI BOONLARD)

If the fighting continues, it could potentially drive up global energy prices and push inflation higher, which is a major concern.

A surge in inflation would likely dampen consumer confidence, reduce purchasing power and weaken domestic consumption. Under this scenario, the real sector and the broader economy could be affected in the next phase, he said.

“Given these uncertainties, the impacts are likely to occur in waves. The first wave has already affected capital markets, while the second wave could affect the real sector via higher prices of goods and services,’ said Mr Kobsak.

If attacks target oil refineries or the Strait of Hormuz is closed for a prolonged period, global energy supply could decline significantly. In that scenario, energy prices and inflation could surge to levels that would be difficult to assess, he said.

Over the longer term, government authorities should prepare for inflationary pressure and rising living costs by accelerating the adoption of renewable energy, such as solar power, and promoting wider use of electric vehicles, said Mr Kobsak.

These measures would help build resilience and provide the country with more alternative energy sources, he said.

MINIMAL COST IMPACT

Jatuphat Tangkaravakoon, chief executive of SET-listed TOA Paint (Thailand), said it is too soon to assess the full impact of the Gulf conflict, but all sectors are likely to be affected.

“Our business is downstream, so we need to watch how upstream industries adjust to the situation and we will adapt accordingly,” he said.

“Oil prices have already increased, and raw materials linked to oil will likely rise as well.”