Ukraine war hits growth forecast

Ukraine war hits growth forecast

Private sector cuts GDP target to 2.5%

Local business leaders expect retail oil prices to rise significantly, causing inflation and higher production costs. Varuth Hirunyatheb
Local business leaders expect retail oil prices to rise significantly, causing inflation and higher production costs. Varuth Hirunyatheb

Thai economic growth is expected to dip to 2.5%, down from an earlier target of 3-4.5%, with the upper bound of inflation at 3% as a result of the dispute between Russia and Ukraine, says the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB).

The government should consider seeking additional loans of at least 1 trillion baht to deal with soaring energy prices as well as to stimulate the economy, which will be hampered by the war, said Federation of Thai Industries (FTI) chairman Supant Mongkolsuthree, who chaired the JSCCIB meeting on Wednesday.

The Russia-Ukraine conflict is more "serious and protracted than expected," he said.

The Prayut Chan-o-cha administration earlier decided to cut the diesel excise tax, usually charged at 5.99 baht a litre, by half for three months after the Oil Fuel Fund, which has been used to subsidise diesel prices, began running low. This prompted the Oil Fuel Fund Office to seek more money.

The office was already granted a 20-billion-baht loan from commercial banks and a 10-billion-baht provisional loan to support its subsidy programme.

The JSCCIB is monitoring the impact of the Russia-Ukraine war on the global and Thai economies over the next three months.

The impact caused the group to downgrade its 2022 GDP growth target to a range of 2.5-4.5%, down from 3-4.5%, with inflation expected to tally 2-3%, up from an earlier prediction of 1.5-2.5%.

"Higher global oil prices will increase production costs, leading to higher inflation," said Mr Supant.

The JSCCIB maintains its export growth forecast at 3-5% this year because Russia and Ukraine are not major markets of Thai exporters.

However, a prolonged conflict may deal a blow to major Thai trading partners, such as the EU, while slowing the global economy, he said. This would eventually affect Thailand's export sector.

With increasing costs driven by expensive oil prices and higher freight rates, manufacturers decided to increase the prices of some products, said Mr Supant.

If global oil prices skyrocket to US$120 a barrel, retail oil prices in Thailand will increase by six baht a litre on average, further pressuring production costs, said Sanan Angubolkul, chairman of the Thai Chamber of Commerce.

The tourism sector would be affected in this circumstance, he said.

"Up to 50% of the 600,000 Russian tourists expected to visit will disappear in the short term," said Mr Sanan.

"But more foreign tourists from other countries should offset the loss."

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