Thai study warns of 32% GDP impact if decarbonization efforts fail to keep up


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The impact of carbon tariffs from Europe and the United States is gradually becoming evident. The Kasikorn Research Center estimating that Thailand could face significant economic losses if it fails to keep pace with the low-carbon measures adopted by other advanced countries. These losses could even amount to as much as 32% of the country's GDP.

Burin Adulwattana, the Managing Director and Chief Economist of Kasikorn Research Center, stated that the Carbon Border Adjustment Mechanism (CBAM) proposed by the EU and the Clean Competition Act (CCA) introduced by the US could serve as potential barriers for high-carbon footprint goods. "If this issue is not addressed promptly, Thai products may encounter adverse impacts from trade barriers," he emphasized.

He asserted that the global decarbonization trend cannot be stopped, and consequently, small and medium-sized enterprises will be compelled to adapt due to the difficulty of separating the global supply chain.

Burin Adulwattana, Chief Economist of Kasikorn Research Center. (Photo: Burin Adulwattana)

Thailand experienced economic losses amounting to 18 billion Thai Baht (about 495 million USD) in 2023 due to the impact of low-carbon measures implemented by Europe and the United States, the research said. This loss accounted for about 0.1% of the country's GDP. It is anticipated that by 2026, these losses will surge dramatically to 167 billion Thai Baht (about 4.59 billion USD).

Burin reiterated his concerns that if Thailand continues its current economic trajectory, its GDP could be surpassed by Vietnam within five years. He stressed the necessity of seeking new economic growth engines and assumes renewable energy as a potential direction. Additionally, he suggested that the development of renewable energy should be in line with the expansion of data centers to further attract foreign investment.

He pointed out that with the development of generative artificial intelligence, the demand for data centers will continue to grow. Thailand currently ranks third in Southeast Asia in terms of data center scale. It is expected that investment in this sector will reach approximately 279 billion Thai Baht (about 7.67 billion USD) by 2027. This surge in investment is projected to inject around 540 billion Thai Baht (about 14.85 billion USD) into the Thai economy, equivalent to 2.3% of the country's GDP.

Burin stated, "Energy is a vital force driving the economy. Having clean energy can help Thailand become a hub for data centers, as these centers require clean and affordable electricity. The impact of clean energy will generate a chain reaction, much like the butterfly effect. If Thailand successfully shifts its production elements towards clean energy, it will benefit all businesses."

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