The Russian economy is battling numerous problems such as the conflict with Ukraine that has led to Western economic sanctions including restrictions on financial transactions and investment with Russia, the falling Ruble and a steep decline in global oil prices. These troubles have already taken their toll on the Russian economy this year, and will likely cause a grimmer outlook next year wherein a contraction of 4.0 percent is projected.
As for Thailand, KResearch has assessed that losses incurred from that compounded crisis will be as high as THB21.56 billion, representing 0.16 percent of our GDP, given that Russian arrivals to Thailand will probably decline and exports to that market will likely shrink, too.
Direct Effects on Our Tourism Sector: Russia's economic slowdown since early in 2014 has already affected the number of their arrivals here. A sharp decline in oil prices, severe depreciation of the Ruble and a domestic interest rate hike in December 2014 have all contributed to falling Russian purchasing power, inevitably hurting inbound tourism from Russia now and possibly next year. KResearch predicts that the number of Russian arrivals will plunge 9.3 percent to 1.58 million arrivals, against 32.7 percent growth in 2013. This downtrend is expected to continue in 2015.
In our base-case scenario, we estimate that Thailand, might receive around 1.19 million Russian holidaymakers in 2015, plummeting 24.6 percent; such income would thus plunge 20.7 percent to perhaps THB90 billion, meaning that Thailand would lose around THB16.5 billion from Russian inbound tourists, compared with expected turnover in normal situation (without the Russian crisis).
Direct Effects on Thai Exports: Demand for Thai merchandise still exists there, thanks to its government's reprisal against Western economic sanctions by imposing a ban on EU food imports in early August, causing Russian importers to look for new sources. Thai food exports to Russia thus rose on such items as fresh chilled/frozen fish meat, chilled/frozen squid, chilled/frozen chicken, chilled/frozen shrimp, canned/processed fruit, canned/processed vegetables, rice, etc.
KResearch projects that our outbound trade to Russia may expand 4.1 percent YoY. Despite that, a deteriorating economy there will undoubtedly soften demand, particularly for capital goods and luxury products, denting our shipments to Russia to a dim forecast of a 16.0 percent contraction in 2015. In this scenario, Thailand might earn USD150 million (THB5.06 billion) less from exports to Russia, versus expected turnover in normal situation.
Indirect Effects on Thailand: Russian economic woes may be contained for now, but the state will face further pressure. Therefore, we suggest close scrutiny towards events in Russia that could have an effect on the EU – Russia's major trade partner and creditor – as well as on other fragile emerging markets. There will likely be some capital flight, as well, since the US Fed will likely harden its monetary policy stance and that will affect Thailand sooner or later.
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