Thailand offers oil users more relief to tame inflation risks

The move will cost Thailand about 20 billion baht in lost revenue. PHOTO: EPA-EFE

BANGKOK - Thailand will extend a tax cut on its most-used fuel and subsidise electricity bills of some users to shield consumers from higher oil prices.

This comes amid a forecast that the nation's sticky inflation may stay above the central bank forecast next year.

The Cabinet approved extending the excise tax rebate of 5 baht (S$0.19) per litre on retail diesel prices for two months to Nov 20, according to government spokeswoman Traisuree Taisaranakul.

The move will cost the administration about 20 billion baht in lost revenue, she said.

South-east Asia's second-largest economy, battling the highest inflation rate in 14 years, has spent about US$5.5 billion (S$7.7 billion) to subsidise diesel and electricity bills.

But with power tariffs rising from this month and the Cabinet giving its nod to raise minimum wages by about 5 per cent, there is a risk persistently high inflation can stifle an uneven economic recovery.

Headline inflation is likely to stay above Bank of Thailand's target range of 1 per cent to 3 per cent next year due to high energy and food prices that may prompt producers to pass through increased costs, according to Siam Commercial Bank.

Retail price index may average 6.1 per cent this year but will ease only to about 3.2 per cent next year, the bank's research group said Tuesday.

Thailand's consumption recovery will face downward pressures from the slow and gradual inflation easing of and fading government economic stimulus, according to Siam Commercial. BLOOMBERG

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