CHIANGRAI TIMES – Prime Minister Yingluck Shinawatra froze energy prices and transportation fares Tuesday in the latest effort by Asian authorities to battle inflation that threatens to impede growth in the world’s fastest-growing region.
“I admit the cost of living has increased due to high oil prices and floods” that hit Thailand late last year, said Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong.
“Countries around the world are facing inflationary pressures,” he told reporters. “However, I believe the situation will improve,” with inflation pressure set to begin easing slightly due to lower oil prices.
Thailand’s battle with higher prices highlights the complicated task facing policy makers throughout the region, where food and energy inflation remain a worry despite sluggish growth in Western export markets and the debt crisis in Europe.
But oil inflation, a major headache for policy makers as it boosts inflation while hurting growth for importing countries, may be set to fade. Benchmark Brent crude surged 18% in the first quarter, hitting $126.22 a barrel in mid-March. But the price has since pulled, dropping 6% so far this month to just over $112 a barrel, or 3% below year-earlier levels.
Thailand’s Energy Policy Committee agreed Tuesday to delay planned increases in the price of compressed natural gas and liquefied petroleum gas for the transportation sector for three months, the panel said in a statement.
Mr. Kittiratt said there is no plan to raise the diesel excise tax this year, indicating the cabinet will continue to extend a cut in the tax implemented by the previous government. The cut, which has been extended several times, is scheduled to expire this month.
The curbs on fuel prices and levies follow steps to cap subway fares as the government seeks to prevent a pickup in inflation later this year. The cabinet Tuesday authorized the Transport Ministry to call on underground train operator Bangkok Metro PCL to delay fare increases scheduled to take effect July 3, said Transport Minister Jarupong Ruangsuwan.
The government’s latest action could temporarily curb price pressure to some extent, said Kampon Adireksombat, a senior economist at Tisco Securities. But inflationary pressure is expected to accelerate in the second half of the year as demand recovers from late last year’s devastating floods, he said.
Thailand’s consumer price inflation slowed to 2.5% on year in April from 3.5% in March, but upward risk has been building due to last month’s increase in the minimum wage and high global oil prices.
The Bank of Thailand left its policy interest rate at 3% last week, even as it warned of continued inflationary pressure and forecast stronger economic growth. Economists expect the bank to stay on hold in the coming months before resuming rate increases.