The EU's latest decision to ban most oil imports from Russia because of its invasion of Ukraine is expected to keep energy prices elevated for 1-2 years, says Kobsak Pootrakul, senior executive vice-president of Bangkok Bank.
Mr Kobsak advised the government to set aside a budget to continue energy price subsidies to help mitigate the impact of higher oil prices on consumers, rather than extending the "Khon La Khrueng" co-payment subsidy scheme and the "We Travel Together" hotel subsidy scheme, both of which require massive funding.
"The latest ban by the EU on most Russian oil imports will put more pressure on global energy and food prices, eventually prompting overall inflation to rise further," he said.
Mr Kobsak said global oil prices rapidly surged to US$120 per barrel and could reach $150 soon because Russia supplies about 10% of the world's oil consumption.
Global fertiliser prices also increased because Russia supplies 14% of urea fertiliser. Together with Belarus, Russia supplies 41% of potash.
Fertiliser prices are expected to stay at a high level in the long term, he said.
EU leaders agreed late Monday to cut Russian oil imports by about 90% over the next six months, a dramatic move that was considered unthinkable just months ago.
The 27-country bloc relies on Russia for 25% of its oil and 40% of its natural gas, and European countries that are even more heavily dependent on Russia had been especially reluctant to act.
The EU ban applies to all Russian oil delivered by sea. At Hungary's insistence, it contains a temporary exemption for oil delivered via the Russian Druzhba pipeline to certain landlocked countries in Central Europe.
According to Mr Kobsak, the global economy faces daunting challenges caused by steep energy prices, rising food prices and volatile financial systems.
"As energy and crop prices keep rising, the inflation rate of each country will inevitably rise accordingly, while the central bank of every country is expected to adhere to a high interest rate policy to rein in inflationary pressure, resulting in fluctuations in the financial markets," he said.
Small countries with a high volume of borrowing are expected to face a serious impact as they will be subject to speculative financial attacks, said Mr Kobsak.
He said the farming sector can support the Thai economy this year as it employs more than 20 million people. Farmers are expected to enjoy higher income from increasing crop prices.
"It is essential the government implement a policy to reduce fertiliser prices," said Mr Kobsak. "Promoting inbound tourism needs to be to revved up, while infrastructure development has to continue."