FPO: Oil Fund levy cut to help lower inflation by 0.5%

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BANGKOK, 30 August 2011  – The Fiscal Policy Office (FPO) has indicated that the Thai economy continued to expand in July on account of lively exports while the Government’s reduction of Oil Fund levy could cause inflation to drop 0.5 percent. 

According to FPO Director Naris Chaiyasoot, the Thai economy in July this year expanded steadily, thanks to the export growth in all categories of products and in most markets, especially China, ASEAN and Europe. Private investment also expanded well, considering imports of capital goods which grew 14.2 percent. However, private consumption showed signs of slowing down due to a 4.5 percent increase in value-added tax (VAT) and less growth in the sales of motorcycles.

Headline inflation in July rose 4.1 percent mainly as a result of an increase in the prices of instant foods, fruits, vehicles and fuel.

Commenting on the Government’s suspension of Oil Fund levy on benzene and diesel, Mr Naris voiced belief that the policy could help bring down inflation by 0.5 percent. Moreover, the industrial, export and tourism sectors are expected to help the national economy in the third quarter expand further. Therefore, he said in September the FPO would consider revising its 2011 GDP estimate, which was previously set at 3.5 percent.