Ekniti calls urgent Finance Ministry meeting as Iran war threatens Thai GDP

Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas has called an urgent meeting of senior Finance Ministry executives as Thailand moves to assess the economic fallout from the escalating conflict involving Iran, amid fears that a prolonged war could push oil prices higher and weigh on national growth.

Ekniti said: “At first, we assessed and hoped that the situation would be resolved within one month. If oil prices were to rise by US$10, Thailand’s gross domestic product (GDP) would be reduced by around 0.2%.

“However, the situation has now escalated beyond our initial expectations, causing oil prices to surge sharply in line with the continuing intensity of the conflict in the Middle East.”

Urgent meeting called as war risk deepens

Speaking after scenario assessments by the National Economic and Social Development Council, Ekniti said the Finance Ministry had moved quickly to convene a high-level internal meeting to review the economic outlook and prepare response measures to cushion the impact of surging oil prices. He said the conflict now appeared likely to last longer than first expected, making the oil shock a more serious threat to Thailand’s economy.

He also said the government would hold a further meeting later in the day through the Centre for Administration and Monitoring of the Fighting Situation in the Middle East to monitor developments and assess the implications of energy prices for Thailand’s economic security.

Every US$10 oil rise could cut GDP by 0.2%

The clearest warning from the Finance Ministry is the potential hit to growth. Under the earlier scenario that the conflict would end within a month, every US$10 increase in oil prices was estimated to reduce Thailand’s GDP by about 0.2 percentage points. With the conflict now intensifying beyond those initial assumptions, the risk to growth has become more acute.

That concern is feeding directly into government planning, as higher oil prices would raise transport, logistics and production costs across the economy and could add further pressure to inflation and household spending. In a more prolonged scenario, economic agencies have already warned of a significantly weaker growth outlook.

Government sets out oil-price response ladder

A Government House source said the government had set out a sequence of measures for managing oil prices according to priority. The first step would be to rely mainly on the Oil Fuel Fund mechanism. If the situation does not ease, the government would consider issuing an emergency decree to allow the Finance Ministry to guarantee additional borrowing. The final option would be to consider cutting excise tax, as the authorities currently want to preserve the stability of state revenue.

The source said a cut of 1 baht per litre in diesel and petrol excise tax would reduce state revenue by about 2.8 billion baht a month. At present, the Oil Fuel Fund has a legal borrowing limit of 40 billion baht. Of that, 20 billion baht has already been borrowed, leaving another 20 billion baht available for management purposes.

As for the fund’s roughly 12 billion baht deficit, the source said this was only an accounting shortfall because settlements with trading partners are made once a month. The next settlement round is due in the third week of April, meaning the negative figure could narrow if global oil prices ease before actual payments are made.

Tax cuts possible, but only if consumers benefit

Regarding calls from the private sector for a 3-baht tax cut for three months, as well as requests from airlines for a reduction in jet fuel tax, the government is prepared to consider the proposals. However, officials say there must be a clear pass-through to consumers, particularly through lower air fares, rather than companies simply keeping the benefit as additional profit.

That position reflects wider pressure from the transport and logistics sectors, which have urged the government to step in as energy costs rise, while aviation regulators have also examined tax and fee relief to stop higher fuel costs from feeding into ticket prices.

Key background

Even so, Ekniti said the public should not be overly concerned, as the government still has policy tools available to manage the situation. The Oil Fuel Fund has previously gone through a crisis in which it was more than 100 billion baht in the red, and officials say the current position remains manageable and within control. He urged the public to wait for clearer details from ministers and the relevant agencies at the next official briefing.