Business

In Thailand, companies feel the economic shock of the war in Ukraine | Russo-Ukrainian War

In Thailand, companies feel the economic shock of the war in Ukraine |  Russo-Ukrainian War

Bangkok, Thailand – For Bangkok-based exporter Peyton Enloe, getting fresh Thai fruits and vegetables onto the shelves of Russian supermarkets has become an almost impossible task.

Russian consumers are cutting back on luxury purchases as the value of the ruble drops to record lows. Additionally, the Aeroflot planes Enloe relies on to transport its products are running out of space as flights fill up with Russian tourists cutting short their vacations.

“We have practically lost access to the Russian market,” Enloe, managing director of Purithai Produce, which ships fresh and frozen produce to Europe, America and Russia, told Al Jazeera.

“My Russian customers told me that people don’t even have the money to buy the basics, let alone ‘exotic’ ones like mangoes, durians, rambutans.”

The Russian economy is being hit by sanctions imposed by the West in response to Russian President Vladimir Putin’s invasion of Ukraine.

But the outlook for Asia has also taken a sharply negative turn as economic pain spreads across the world.

The region’s fragile post-pandemic recoveries have been thrown into doubt as oil prices approach $140 a barrel, threatening a new wave of rising inflation and supply chain crisis – challenging governments that have already had to spend heavily during the pandemic to find more resources to protect their populations from rising costs. Analysts expect oil prices to rise further after President Joe Biden announced a ban on Russian oil, gas and coal imports on Tuesday.

Rising oil prices have clouded Asia’s post-pandemic economic recovery [File: Angus Mordant/Reuters]

Putin’s military campaign in Ukraine has disrupted the flow of goods between continents, with major shipping companies like Maersk and CMA CGM announcing they will no longer serve Russian ports. Asia’s largest economies are also dependent on imported oil and gas – of which Russia is the world’s third and second largest supplier respectively – making them vulnerable to rising energy prices.

“Asia will not be affected as much as Russia or Europe,” Tommy Wu of Oxford Economics in Hong Kong told Al Jazeera. “But rising global energy prices and slowing global trade will weigh on Asia’s recovery, especially for countries that rely heavily on oil imports like Japan, South Korea and India. “

For China, which has refused to condemn or sanction Russia, any prolonged slowdown in global growth caused by the war is bad news, even if Beijing steps up economic cooperation with an increasingly friendless Moscow.

“As Russia becomes increasingly isolated, it will rely more on China as a trading partner,” Julian Evans-Pritchard, senior China economist at Capital Economics, said in a briefing note. last week.

“This will present opportunities for Chinese companies to take market share from Western suppliers and buy power at a discount. But such gains will be small compared to the cost to China of rising commodity prices and the impact those price increases have had on real consumer incomes in China’s major export markets.

For Thailand, Southeast Asia’s second-largest economy and one of the hardest hit by the pandemic, the economic fallout from the Russian invasion is largely felt in specific sectors.

While only 1% of Thai exports go to Russia, companies operating in the country are struggling with severe supply chain disruptions.

For Enloe, an American who has worked in Thai agricultural businesses for more than a decade, getting fresh agricultural produce to Russia and Europe depends on fast and reliable connections.

“Aeroflot has already been banned from most European countries,” he said. “In the long term, that will be a problem.”

phuket
Phuket, Thailand has relied heavily on Russian tourists during the pandemic [File: Jorge Silva/Reuters]

Russia has also been the biggest source of tourists to the kingdom as it tries to revive its tourism sector after two years lost to the pandemic.

Since the invasion, many Russians have had to give up their vacations in the country to run businesses or other affairs at home, or because the ruble’s fall made their stay 30% more expensive overnight.

Those who are still in Russia and want to travel are having difficulty paying for their trips after Russian banks were cut off from the SWIFT international payment system.

Amid the economic fallout, Thai Prime Minister Prayuth Chan-O-Cha called on the public to understand.

“We are discussing measures to freeze the price of gasoline. But we can’t just help everyone,” he told reporters on March 1. “As you know, the government doesn’t really have the money, so you have to understand us.”

Small shippers at Thailand’s Leam Chabang port are already charging cargo customers an oil surcharge of almost 4%, a European company told Al Jazeera on condition of anonymity, with the costs likely to be quickly passed on to consumers. who have struggled with months of rising prices.

On Friday, Thailand’s Ministry of Commerce announced that inflation in February hit 5.28%, the highest rate in 13 years and well above forecasts.

Analysts see the worst to come as war in Ukraine dims hopes for a quick economic recovery in 2022.

“We are going to feel the pain deeply this year and most likely the next,” Chaichan Chareonsuk, chairman of Thailand’s National Shippers Council, told Al Jazeera. “The geopolitical situation, global inflation, the pandemic – Thailand still has a high number of cases – and freight costs are still very high. All this is certain to harm our growth.