Bangkok: The University of the Thai Chamber of Commerce warns that rising oil prices will impact the entire economic system and risk accelerating inflation.
According to Thai News Agency, the University of the Thai Chamber of Commerce (UTCC) assesses that rising oil prices, driven by tensions in the Middle East, are putting pressure on the Thai economy, impacting both purchasing power and production costs. It also warns of a risk of accelerating inflation if the situation persists.
Associate Professor Dr. Thanawat Polvichai, President of the University of the Thai Chamber of Commerce and Chairman of the Advisory Board of the Center for Economic and Business Forecasting, revealed that the recent increase in oil prices is clearly passing on costs into the economic system through transportation costs, product prices, and production costs. This is a significant pressure on consumer purchasing power and the recovery of the Thai economy. He estimates that the increased energy costs are causing a large outflow of money from the economic system, possibly as much as 40-42 billion baht per month. This money will circulate more in the energy sector and imports than in domestic spending, limiting the effectiveness of government economic stimulus measures.
Meanwhile, oil prices are also a contributing factor to inflation. It is estimated that every 1 baht increase in the price of diesel fuel will impact the Thai economy by approximately 0.04% and push the inflation rate up by about 0.3 points, reflecting the vulnerability of the Thai economy to high energy prices.
In the business sector, those most clearly affected include transportation, logistics, agriculture, fisheries, and manufacturing, as energy costs and imported raw materials are major components of the cost, especially rising transportation costs and shipping rates which are projected to increase several times over.
Furthermore, there is an additional risk from key raw materials in the supply chain, such as plastic pellets and fertilizers, which are related to the petrochemical industry. If these supplies become tight or scarce, it will widely increase product costs and make it more difficult to control domestic prices.
The University of the Thai Chamber of Commerce has assessed three scenarios for the economic impact under the current situation to reflect the severity of the effects. If the situation improves within three months, the economic slowdown will be limited, and inflation will remain within the range of approximately 2%. However, if it persists for six months, the economic impact will become more evident, and inflation may move closer to 2.8%.
However, if the situation drags on until the end of the year, the Thai economy risks low or even negative growth, while inflation may accelerate to around 3.6%, reflecting the risk of an economic slowdown coupled with high inflation, which would affect economic stability.
Regarding policy recommendations, the government should prioritize maintaining energy price stability, particularly by managing shortages and delaying oil price increases during crises. This should be coupled with measures to provide targeted assistance to directly affected groups such as transportation, agriculture, and fisheries.
In the medium term, fiscal reserves should be maintained to cope with uncertainty, while tourism and exports should be stimulated to keep the economy moving. Pricing policies should be based on consultations with the private sector to strike a balance between protecting consumers and maintaining business viability.
Furthermore, economic stimulus measures such as "Half-Price Plus" schemes should be designed to be more targeted, focusing on low-income groups and actual spending within the system to create efficient economic circulation, without needing to provide assistance to all groups, which would require a high level of budget as originally planned.
Associate Professor Dr. Thanawat believes that policy decisions during this period present significant challenges, as they must strike a balance between managing the cost of living for citizens and maintaining economic stability to prevent a crisis. This is a situation that governments worldwide face amidst the current global economic volatility. Crucially, the government must engage in close consultation with the private sector to jointly drive economic growth and mitigate the overall impact of rising living costs on the public.