CEBF disappointed with diesel subsidy policy

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BANGKOK, 19 April 2011 – The Center for Economic and Business Forecasting (CEBF) of the University of the Thai Chamber of Commerce (UTCC) is disappointed with the decision of the government to keep on subsidizing diesel prices below 30 baht per liter. 

CEBF Director Dr Thanawat Polvichai criticized the government for failing to keep its promise to peg diesel prices only until the end of April. He indicated that the government decided to keep subsidizing diesel and cut excise tax in order to favor voters in the next election.

The director also quoted Finance Minister Korn Chatikavanij as having announced that the government would keep the subsidization policy for a short time and would not cut oil excise tax in order to avert impact on monetary discipline in the future.

Dr Thanawat then suggested that the government should adjust the diesel price ceiling up and cut the excise tax slightly to help shoulder the burden of the fuel oil fund. He said the government would lose 44.38 billion baht income if it kept pinning diesel prices below 30 baht until September 2011.

The director said however that this amount of money would fall into people’s hands and would generate a circulation of over 60 to 80 billion baht in the economy. As a result, the UTCC would adjust its Gross Domestic Product (GDP) estimation up from an earlier projection of 4.2% to 4.3-4.4%