Another natural disaster disrupts Asia’s supply chains

Thailand’s automotive parts supply chain is being severely disrupted by the worst monsoon floods for some five decades.

The floods, which have inundated one-third of the country since July, are likely to have a harmful effect on the supply chains of automakers in other countries, too, said analysts, since Thailand is one of the biggest manufacturing hubs in South-East Asia for a number of suppliers.

A special report by IHS Global Insight into the impact of the flooding in Thailand comes as analysts have revised their forecast for Thai economic growth this year down to around 2.5 percent from 3.7 percent estimated in September.

“The floods have hit the north, north-east and central regions of Thailand particularly hard, causing serious damage to the country’s main rice-producing areas and several key industrial areas—home to a large number of international auto component suppliers and other export-oriented factories,” said IHS analyst, Margaret-Anne Orgill in London. “Many have been forced to halt their production.”

The economic impact of the flooding is expected to be sizeable, added Orgill, given that all economic sectors, ranging from agriculture to industry to services, have been affected. Acknowledging that the situation is in a constant state of flux, IHS Global Insight’s initial estimate is that the economy’s 2011 growth rate will probably be reduced to around 2.5 percent compared with the 3.7 percent anticipated in September.

“With the flooding expected to continue until late November, the number of casualties and the economic costs are likely to rise further,” noted Orgill.

The economic fallout and social distress from the floods will feed into the political challenges already faced by Thailand’s two-month-old government, IHS analysts added:

“Prime Minister Yingluck Shinawatra has come under increasing criticism for her slow initial response to the floods and contradictory information given by her administration, and this is likely to bring an early end to her honeymoon period.

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