Suspension of Oil Fund contributions to help lower inflation

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BANGKOK, Aug 30 – Suspending collection of levies from diesel and petrol sales to the state Oil Fund will help headline inflation drop by 0.5 per cent each month until the measure expires, Dr Naris Chaiyasoot, Director-General of the Fiscal Policy Office (FPO) said Tuesday.

The effect will be clearly seen in September, he added.

The risk of inflation in Thai economy has reduced but risk from the global economy stemming from financial problems in Europe and the US has risen. It is necessary to stimulate domestic consumption to substitute for the possible slowdown of exports.

Consequently, the goal to achieve fiscal policy balance in five years can be changed, depending on the situation. The FPO will review its projection on the Thai economy in September.

Boonchai Charassangsomboon, Executive Director of the Macroeconomic Policy Bureau said that Thai economy in the third quarter was projected to grow at a higher rate than in the first and second quarters, which grew 3.2 per cent and 2.6 per cent respectively.

Driving factors for the Thai economy in the third quarter are industrial production, which has returned to normal, particularly automotive industries, after being sluggish due to the disaster in Japan.  Electronics production was expected to expand at a higher rate than that in the second quarter. Moreover, the tourism sector and exports are still growing satisfactorily.  It is believed that the varied economic problems will not cause a Thai economic recession and will not impact Thai economic growth.

Thai economy continued growing in July, driven by better-than-expected exports, as can be seen in the export value which hit a record high at US$21.5 billion, a 38.8 per cent growth year-on-year.

Private investment continued growing, with imports of capital goods rising 14.2 per cent due to higher commercial auto sales after shrinking for two consecutive months at 10.1 per cent.

Private consumption signaled slowing growth, reflected in value added tax (VAT) growth at 4.5 per cent, dropping from 12 per cent the previous month, in tandem with another indicator, the consumption of durable goods such motorcycles, sales of which grew 11.6 per cent, dropping from 18.2 per cent in the previous month.

Meanwhile, Thailand’s public debt at the end of June stood at over Bt4.263 trillion or 40.69 per cent of the country’s gross domestic product (GDP), down Bt15.8 billion from the previous month, according to Public Debt Management Office Director-General Chakkris Parapuntakul.

Of the total amount, about Bt3 trillion was in direct government borrowings, around Bt1.07 trillion was from state enterprises which are not financial institutions,Bt158.3 billion in debts incurred by government financial institutions, and  Bt30.5 billion as debts of the Financial Institution and Development Fund.

Mr Chakris added that other state agencies have no outstanding debts.