Thursday, 13 March 2008

Oil price surge can deter economic recovery, says BoT

BANGKOK, March 13 (TNA) – Surging oil prices could deter the country's economic recovery and fuel rising inflation, according to the Bank of Thailand.

Siripan Nakornthap, head of the economic analysis team of BoT's Local Economy Department, said in an article on Thailand's "Energy Policy in Time of Major Oil Price Rises"' that the price of crude oil price had surged to US$109 per barrel at present and is likely to further rise to $120 per barrel within this year.

Many have begun to worry that the continued increase in the crude price will affect Thailand's economic recovery, particularly local consumption which is seen as picking up in the fourth quarter of last year and the first month of this year.

It might have a domino effect on production and employment, leading to a less-than-expected degree of recovery in the economy.

In addition, it could worsen inflationary pressure if the crude price continued its surge.

She said her team saw a need for the government to implement an alternative energy policy.

However, the government must realise the policy implementation would fuel rising energy plant prices, which could then have an impact on food prices.

She said her team supported the oil price subsidy because it could help ease impacts of the fuel price surge.

Such a price support subsidy should not last long because it requires a substantial budget, and additionally, it would not encourage the production sector to adjust to the realities of a changing environment.

Finally, it would undermine the country's econoimic and export competitiveness.

To address the problem in the long term, the team suggested that the government set aside a budget to invest in construction of the mass transit system, encourage the private sector to reduce energy consumption in the production process, and promote energy-saving campaigns. (TNA)-E005