In October 2011, only a few weeks before the country’s economy was engulfed by the Chao Phraya river floods, the EIU, a major source for country risk profiles generated by businesses and investors across the globe, forecast an expansionary fiscal policy of the Thai Government for 2012 and estimated GDP growth of 3.8 percent in 2011 to 4.8 percent in 2012 (EIU, 2011a).

After the floods shut down more than 14,000 businesses nationwide, this estimate of real GDP growth was revised downwards to 2.5 percent in November and to 1.2 percent in December (EIU, 2011b & 2011c; Atradius, 2011). Political and related policy forecasts had to be revised also owing to expected repercussions from the floods.

A few months earlier, an investor country briefing by a major bank, based heavily on EIU data, did note that the export-heavy Thai economy was “very vulnerable to external demand shocks” (Rabobank, 2011), and had been affected by the Japan disaster in March 2011. Yet its growth projections for Thailand in 2011 remained unchanged.

An empirical study of the relationship between foreign direct investment (FDI) flows and the occurrence of disasters over the last 40 years in Thailand shows that investment has not been influenced by disaster occurrence in general, and floods in particular (Figure 12.2; Thampanishvong, 2012).

However, other studies covering 94 countries over a 20-year period have found a negative and significant relationship between disasters and FDI (Escaleras and Register, 2011).

In Thailand’s 2012 economic forecast briefing, flood risk is mentioned, suggesting that the “perfect storm of factors that combined to produce the floods in 2011” were not in place for 2012 (EIU, 2012e). Yet, it cautions that the risk of renewed flooding had not disappeared and notes that investor confidence had not been restored, exacerbated by intra-government conflict over water management and flood drainage between the city of Bangkok and surrounding areas.