Thai Floods Impact May Last Longer than Japan’s Disaster

By Kaori Kaneko | November 29, 2011

The impact from Thailand floods on Asia’s production networks may last longer and be deeper than that from Japan’s March earthquake, tsunami and nuclear crisis, a senior Asian Development Bank official said on Tuesday.

Iwan Azis, head of ADB’s Office of Regional Economic Integration said the impact of severe floods in one of Asia’s prime manufacturing bases could last well into next year.

“We are still working on it, but I’m afraid the Thai flood impact on the production network is bigger,” Azis told Reuters.

Thailand’s worst flooding in at least five decades forced many firms to close plants that are either under water or lack necessary parts, hitting Japanese manufacturers just when they were making up for production losses after the March 11 disaster.

Azis, former economics professor at Cornel University, also said that the euro zone crisis was a “very serious” threat to Asian economies, which could be affected through its impact on trade and financial markets.

Asia’s limited exposure to the heavily indebted euro zone periphery was of little consolation because the crisis was now affecting Europe’s major economies and the United States — key markets for Asian exporters.

“The slowing down in those two parts of the world, the U.S. and Europe, will affect their demand and exports from Asia,” Azis said.

He said Asian economies could steel themselves against such adverse effects by boosting intra-regional trade, strengthening their banking sectors and increasing financial flows within the region. Funneling more of their high savings into productive long-term investments such as infrastructure, education and healthcare would also help make Asian countries more independent from the ups and downs of their traditional export markets.

In its last economic report published in September, ADB noted the dampening effect of Europe’s and U.S. troubles but still predicted robust growth for emerging Asian nations in 2012, led again by China.

The development lender is due to update its forecasts for Asia on Dec. 6.

(Editing by Tomasz Janowski)

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