Govt policy has minor impact on prices: experts

Kanit Sangsubhan, director of the Fiscal Policy Research Institute, the Finance Ministry’s think-tank, said inflation was largely determined by movements in global energy and food prices; government policies did not have much impact.
The Finance Ministry projects headline inflation at 3.3 per cent next year, compared with an estimate of 3.8 per cent for this year, as the increase in oil price is expected to slow. The Bank of Thailand and the Finance Ministry have set a headline inflation target of 3 per cent plus or minus 1.5 percentage points for next year.
Supavud Saicheua, managing director and head of research at Phatra Securities, agreed with the government’s plan to float fuel prices to reflect global levels. If domestic prices were to be adjusted upward in line with global fuel prices as a means of reflecting businesses’ real costs, inflation should not be a worry, he said. “It’s a one-off impact,” he said.
“The important thing is to have companies adjust to the reality of fuel costs,” Supavud said. Capping fuel prices too low could cause problems by pushing demand abnormally high, while supplies of NGV are limited, he said
Siam Commercial Bank president Kannikar Chalitaporn said that gradually floating fuel prices was a better option, as it helped the private sector adjust to the real cost of fuel.
Fuel prices have been subsidised for a while, causing a distortion of the fuel-price structure. The money to subsidise the fuel comes from taxpayers, she said.
And even though floating the fuel price contributes to inflation, the Thai economy is in a good position to deal with the fluctuation, the banker said.
Economic and Business Forecasting Centre director Thanavath Phonvichai said Thai inflation is expected to increase by 3.5-4 per cent next year following the restructuring of the fuel price.
“Prices of goods and manufacturing costs will increase next year, driving inflation higher. Oil prices in the global market will also continue to rise next year,” said Thanavath. For every baht of increase in the domestic diesel price, inflation rises by 0.2-0.5 per cent, he said.
Federation of Thai Industries chairman Payungsak Chartsutipol said the cost of manufacturing would increase dramatically after the LPG price increases next year. He called for subsidies for ceramics, mirror and glass producers.
Thai manufacturers will face tough competition and possible export problems, he said, as LPG is a major production cost for the three sectors.
Deputy Prime Minister and Commerce Minister Kittiratt Na-Ranong said the government will carefully consider helping manufacturers in these sectors by subsidising the LPG price for about three years, as the sectors are major employers.