Bangkok: The Federation of Thai Industries (FTI) has indicated that a diesel price ceiling of 33 baht is acceptable to the industrial sector, although any price exceeding 35 baht would be unsustainable. The FTI foresees a potential resolution to the ongoing petrochemical raw material shortage, with producers halting exports and ramping up imports from alternative sources. Meanwhile, the February consumer confidence index reached an 11-month peak, though concerns persist about a potential war affecting the economy.
According to Thai News Agency, Mr. Kriengkrai Thianukul, President of the Federation of Thai Industries, disclosed that the industrial confidence index for May reached its highest level in 11 months, standing at 90.0, up from 88.7 in January. This improvement is attributed to several factors, including a US Supreme Court ruling invalidating reciprocal tax measures, the Monetary Policy Committee's decision to cut interest rates by 0.25%, a 46% rise in Foreign Direct Investment (FDI) in January, the Cabinet's temporary reduction in the FIDE fund contribution rate, and heightened consumer spending during the Chinese New Year.
Mr. Kriengkrai noted that the February confidence index was surveyed in January, projecting that March, marked by unrest in the Middle East, might see the index drop to 85-86%. He highlighted that escalating tensions in the Middle East, including the closure of the Strait of Hormuz and attacks on oil refineries in the Persian Gulf, have a direct impact on global oil supply. Given Thailand's reliance on oil imports from the Middle East, the country is vulnerable to regional energy price fluctuations, which could affect the broader economy.
The rising fuel prices are a critical factor influencing the Thai economy's cost structure, affecting production costs, product prices, and consumer purchasing power. The FTI has assessed three scenarios regarding the impact of oil prices on the Thai economy. A 1-2 baht increase in diesel prices is considered low, with limited impact on transportation and commodity prices. A 2-4 baht rise would have a broader effect, causing transportation costs to rise by 5-12%, impacting SMEs and energy-intensive industries significantly. An increase exceeding 4 baht would have severe consequences, akin to the energy price crisis during the Russia-Ukraine war, pushing transportation costs up by 15-20% and accelerating inflation rates.
The current diesel price ceiling of 33 baht is manageable for the industrial sector. However, if prices surpass 35 baht, it would strain businesses and the economy, especially the industrial sector, leading to higher product prices.
Addressing the petrochemical raw material shortage, the FTI acknowledges a real shortage and intense competition for supplies, causing prices to rise. The industry is working with the government to resolve the issue, confirming sufficient raw materials until April, with negotiations underway with other sources, including China, Korea, Japan, and Singapore, for May. Thai producers are also collaborating to reduce exports to conserve domestic supplies.
The private sector has proposed two measures to the government: suspending the export of aluminum, iron, and paper scraps to recirculate them domestically, thereby reducing import costs and energy consumption, and considering subsidies for jobbers to bridge the price gap and prevent competition over purchases at gas stations.