With everyone freaking out over Greece, a little perspective from Jimmy Jean, an economist at Desjardins Capital Markets in Montreal.
“Keep an eye on Thailand!” Mr. Jean yells in his morning note to clients Wednesday.
The country is struggling to recover from the worst flooding in five decades. Here’s a short take by Bloomberg News on the early economic impact. Here’s the human impact: 400 deaths since July, according to Reuters.
As leaders decamp for the Group of 20 Summit in Cannes, France, all the talk is about extending a life line to Europe. But Greece and Italy aren’t the only countries whose troubles pose a threat to the global economy.
Recall the blow to the global economy from Japan’s natural disaster.
Thailand represents a smaller version. The country is a big maker of automobile parts, and Mr. Jean notes that Honda’s Canadian unit is cutting overtime through November because of disruptions to its supply lines caused by the Thai disaster.
And remember the food crisis sparked by rapid inflation in the cost of rice and other staples? Thailand and Vietnam account for about two-thirds of the global rice trade, and about a quarter of the Thai crop has been lost to the floods. Rice prices are soaring.
“This is still an unfolding situation, but the impact on global trade and inflation may be greater than expected,” Mr. Jean said. “While this is evaluated as a downside risk, the worrying reality is that the fragility of the global economy provides limited room to absorb more shocks, perhaps even less than when the Japanese earthquake struck.”