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'Thai fuel price rises won't spur inflation'


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Posted

'Fuel price rises won't spur inflation'
Erich Parpart
The Nation

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Prasarn

BOT governor hints at lower GDP; export growth forecast soon

BANGKOK: -- Bank of Thailand Governor Prasarn Trairatvorakul says the government's energy-reform plan, in which it changed fuel prices to reflect the real cost, will have a minimal impact on inflation despite some prices increasing.


"The increase of energy prices will affect logistics and product prices, and the BOT has been monitoring and creating scenarios to find out what kind of impact this would have on inflation," he said.

"And speaking in layman's terms, we can take it," he said, adding that the new target for the inflation range would be manageable.

He said energy prices globally were not that high, as supply was still vast and demand remained relatively constant. This meant prices should have no pressure on the global inflation and when looking at the outlook, Thailand's energy reform plan should not be an obstacle or contribute to changes in monetary-policy decisions.

The BOT's inflation target for 2015 will be presented to the Finance Ministry on Friday, he added. Prasarn also hinted that the central bank's Monetary Policy Committee would disclose that there has been a slight change in its prediction for the country's economic expansion after its meeting on Friday.

He said the forecast for export growth would also most likely drop because of the slower-than-expected recovery of the global economy.

The BOT's previous growth projection for gross domestic product was 1.5 per cent, and 3 per cent for exports.

The result of the MPC meeting is to be revealed next Tuesday.

"The forecast for 2014 GDP growth will be close to the previous projection of the MPC, while the prediction for export growth will be lower than the previous estimation," Prasarn said.

He explained that the Thai economy was recovering because domestic demand and consumption has improved, as seen in the recent increase in loan approvals. But exports and tourism figures were lower than expected.

Meanwhile government spending has improved slightly thanks to clarity in economic policy and the setting up of the fiscal budget, which contributed to a better-than-expected increase in private investment.

"Consumption is recovering but investment normally takes a longer time to recover than consumption, since it can adapt faster than both private and public investments," he said.

"We believe that the day will come when it is time for the private sector to start investing to increase production, and this kind of investment activity will continue to increase from now until the end of the year."

Prasarn noted that the world economy was in a state of low growth, low inflation and low volatility, which allowed central banks to take risks in the hope of a better return on investment. The monetary policies of major economies were quite relaxed, and this has also contributed to the low volatility rate.

"Central banks around the world have warned that they are moving towards products that are riskier because currently there is low volatility in the world's financial situation. This makes fund managers believe that there is lower risk while it is quite clear there is low growth and low inflation," he said. Prasarn said the US economy had continued to recover and it could be expected that the Federal Reserve would terminate its quantitative-easing (QE) policy next month as scheduled. The market had estimated that the US policy interest rate should begin to creep towards normalisation before increasing by the middle of next year.

"The pace at which the US will increase the interest rate is dependent on economic numbers and the indicators from the labour market. If these numbers are in a positive direction and strong, the Fed might increase the interest rate before the common expectation, or vice versa," he said.

He said the potential increase of the US key interest rate would not affect emerging markets too much because when the Fed started its tapering its QE programme last year there had been no "surprise", which meant the market would not feel any "shock" because it could gradually adapt.

Source: http://www.nationmultimedia.com/business/Fuel-price-rises-wont-spur-inflation-30243874.html

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-- The Nation 2014-09-23

Posted

Twice in the last seven days I have visited my local Tesco Lotus and on the second occasion noticed that some of the items purchased earlier had gone up by a Baht or two.

Tesco Udon Thani's regional supply depot is in Khon Kaen which is at least a 260 Km round truck by truck and apart from the two supermarkets there are the Express convenience outlets serviced by truck.

This sort of situation can be multiplied by various supermarkets, stores and businesses all over the country so how is it an increase in fuel costs won't affect inflation ?

Posted

It feels strange to read and interpret the news opposite from what they are reporting. If they say 'no impact to inflation', it means that there will be a domino effect to other businesses. If their costs go up, the prices will not remain the same.

Posted

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inversion is the new norm..these people talk absolute ______ as almost everything is moved by Road here of course it will have an impact

All policies put place by officials are good except inflation is up, GDP is down, unemployment is up, et. etc.

Posted

'Fuel price rises won't spur inflation'

that is a bunch of crap. How did this man get this job?

It looks like you are not very informed on economic matters Kun Mango, a detailed study has undoubtedly been performed and the the indicators are pointing in the right direction. Of course the situation will have to be monitored and it is possible a further visit to the tarot card reader has already been booked.

Posted

On this statement, Thailand must be the only country in the world where increased cost dont equate to a price increase and a small profit increase amazing

Posted

So let me get this right, something going up in price which impacts everyone, transportation and movement of goods and travel will not affect inflation.

OK, I believe you.

  • Like 2
Posted

<script type='text/javascript'>window.mod_pagespeed_start = Number(new Date());</script>

inversion is the new norm..these people talk absolute ______ as almost everything is moved by Road here of course it will have an impact

Yep, price of fuel up everything else up , the government should stick to governing, dictating business what they shall charge is not their domain.

Posted

Basic economics dear boy.

Any increase in fuel costs imposed upon manufacture or transportation of goods, however small that cost, will generate inflationary pressures.

Posted

I am confused didn't the Junta just lower gas prices to better reflect the cost?...

What does the venerable Governor have to say about the impending tsunami of debt the Thai people will have to pay for?...

  • Like 1
Posted

I am confused didn't the Junta just lower gas prices to better reflect the cost?...

I believe that this is the plan for 2015.

But yes, it makes you wonder why fuel prices were lowered in Q3 of this year, whilst they were clearly planning to increase them next year....

Perhaps the Thai government is more aligned with western style political strategy than we think!

Posted

<script type='text/javascript'>window.mod_pagespeed_start = Number(new Date());</script>

inversion is the new norm..these people talk absolute ______ as almost everything is moved by Road here of course it will have an impact

Yep, price of fuel up everything else up , the government should stick to governing, dictating business what they shall charge is not their domain.

They aren't telling business what to charge, they are cleverly removing themselves from paying a fuel subsidy from tax revenues and putting that cost on consumers, which they acknowledge, will have a ripple effect through the economy.

The consumer pays more at the pump and at the register for goods and services. They also get a subtle tax rise because taxable goods cost a bit more. A slow screw.

Meanwhile, the government still gets paid for its own oil products, keeps the tax revenue it used to put toward subsidy, and enjoys an uptick in tax revenue on the back of increased prices for goods.

I've probably got that all wrong. Anyway, feels like the inevitable end to the junta honeymoon, and the cycle starts again.

  • Like 1
Posted

"He said energy prices globally were not that high, as supply was still vast and demand remained relatively constant. This meant prices should have no pressure on the global inflation and when looking at the outlook, Thailand's energy reform plan should not be an obstacle or contribute to changes in monetary-policy decisions."

​Yes, but if Thailand has been subsidising fuel prices, so that the real cost of fuel has not been paid, moving to a scenario where the real cost of fuel is applied, there are going to be a lot of inflationary consequences.

None of them good for Thailand.

Posted

"The increase of energy prices will affect logistics and product prices, and the BOT has been monitoring and creating scenarios to find out what kind of impact this would have on inflation," he said.

Ummm, isn't this increase of prices what inflation is? Or has BOT removed actual prices from their way of determining inflation. They should share this piece of economic genius with the rest of the world, there might be Thailand's first Nobel prize in this radical new economic theory.

Not sure what the point of your statement is. Mr. Prasarn mentioned that the planned increase of fuel prices will only have minimal impact on inflation. He didn't say it will have no impact. And if you look at his track record, I think he is quite a good central bank governor, I think he is one of the better leaders of central banks in the world.

Overall I think it wouldn't be bad to move to a system where fuel prices are determined by the market rather than government guided prices which are managed through an oil fund which to this date I don't fully understand how it works. My recommendation would be to get rid off that oil fund and let the market determine pump prices.

Posted

Inflation when prices rise to reflect the costs to provider, so if it costs 45 baht for Phad Thai but costs 35 baht to make the provider raise price to 50 baht that is not inflation? What planet they find him?

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