FTI warns 6-baht diesel hike will hit Thai industry across board
FTI says the sharp rise in diesel prices could push logistics costs up by 25%, raise goods prices, and deepen pressure on Thailand’s slowing economy.
- The Federation of Thai Industries (FTI) warns that a record 6-baht per litre diesel price increase will cause a chain reaction throughout the economy.
- The hike is expected to raise logistics costs by 20-25%, leading to an 8-10% increase in the price of goods as businesses absorb the new cost structure.
- This price shock, compounded by rising electricity costs, will severely affect energy-intensive industries like steel, cement, and chemicals.
- The FTI projects the sustained high price could accelerate inflation to 5-6% and slow Thailand's GDP growth to as low as 1%.
The latest energy price shock is beginning to feed through to the real economy, with the Federation of Thai Industries (FTI) warning of a chain reaction after diesel prices were raised by THB6 per litre in a single move to THB38.94 per litre, the largest one-off increase on record, and by more than 25% within a single week.
Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), said the increase stemmed from a resolution by the Oil Fuel Fund Management Committee to reduce energy price subsidies and shift policy towards “targeted subsidies” to ease the burden on the Oil Fuel Fund, which is carrying a deficit of more than THB28 billion, by adjusting prices for all fuel types.
Price restructuring to reflect costs, curb cross-border smuggling
The latest price increase also aims to bring Thai fuel prices more in line with those in the region.
Previously, Thai diesel prices had been significantly lower than those in neighbouring countries, particularly Malaysia, creating incentives for cross-border fuel smuggling.
The FTI believes the price adjustment will help reduce those incentives, but at the cost of inevitably higher domestic economic costs.
Transport costs jump 25%, pushing up prices across the system
The industrial sector estimates that a diesel increase at this level will have a severe impact on the transport sector, a key cost base of the economy.
Logistics costs are now expected to rise by 20-25%, up from an earlier estimate of 15-20%.
The impact is expected to spread to raw material costs and product prices, with overall goods prices likely to rise by 8-10%, particularly in April, as existing inventories are gradually depleted and businesses begin to absorb the full new cost structure.
For the 59 controlled goods, the state will need to step in to ensure pressure on consumers and businesses does not become excessive.
Power bills set to compound pressure on heavy industry, inflation risk rises
In addition to oil, energy costs are also under pressure from electricity prices, with the Ft charge for the May-August period expected to rise above THB4 per unit.
Energy-intensive industries such as steel, cement, ceramics, pulp and chemicals will be directly affected, leading to further increases in production costs and creating the potential for broader pass-through to product prices.
Inflation may accelerate to 5-6%, and the economy risks sub-1% growth
The FTI estimates that if diesel remains at THB38.94 per litre, higher than during the energy crisis triggered by the Russia–Ukraine war, inflationary pressure could accelerate to 5-6%.
At the same time, Thailand’s economic growth risks slowing, with GDP expansion potentially limited to no more than 1% if the situation drags on and no additional support measures are introduced.
The Office of the National Economic and Social Development Council (NESDC) has said that every 1-baht-per-litre increase in diesel prices reduces GDP by around 0.02%, reflecting the Thai economy’s sensitivity to energy costs.
Kriengkrai said the business sector must urgently make structural adjustments by improving energy efficiency, investing in clean energy, and applying AI to manage energy use more systematically.
He also set a target of reducing energy consumption by at least 20%, alongside logistics development measures such as pool logistics and backhauling systems to cut empty trips, lower costs, and reduce oil consumption.
Industry urges soft loans, energy saving as national agenda
The industrial sector also called on the government to urgently roll out support measures, particularly improved access to low-interest funding, or soft loans, for SMEs to help ease the impact of surging costs.
At the same time, energy conservation should be pushed as a national agenda, alongside stronger promotion of biofuels to reduce dependence on imported energy.
Amid what appears to be a prolonged energy crisis, the FTI said cooperation from all sectors, government, the private sector and the public, will be essential to support the economy, maintain cost stability and move towards a green economy in the long term.
