Thai and Malaysian diesel prices raised... Indonesia considering reducing euro subsidies
thailand gas station
There are predictions that Southeast Asian countries may reduce fuel cost support due to financial burden, which could stimulate inflation and political instability.
According to Bloomberg News on the 4th (local time), Thailand and Malaysia recently raised the ceiling on diesel prices, and Indonesia is also considering reducing fuel subsidies to raise funds to stimulate the economy.
Thailand maintained the diesel price ceiling at 30 baht per liter at the beginning of this year, but recently raised it to 33 baht.
This reflects the fact that the debt of the state-run oil fund, which provides subsidies, amounts to 110 billion baht (about 4.1 trillion won).
As the Petroleum Fund has reduced subsidies and gradually raised the retail price of diesel, it has recently nearly reached its upper limit.
Crystal Tan, an economist at the Australia and New Zealand Bank (ANZ), said, "The current cap will remain in place until the end of July, and there is a possibility that diesel prices will rise further after that."
Bloomberg predicted that as prices in Thailand rise, the need for the central bank to cut interest rates will weaken.
Han Teng Chua, an economist at DBS Bank, said that with the recovery of tourism and the government's cash payment policy, Thailand's inflation rate this year could jump from -0.1% in January to May to 0.9% on an annual basis.
Meanwhile, Prime Minister Theta Tawisin has been pressuring the central bank to lower the benchmark interest rate.
Bloomberg News reported that Prime Minister Tawisin's approval rating is already declining.
Thai truck drivers are planning a nationwide protest to demand that the price cap for diesel be lowered to 30 baht per liter.
Malaysia recently drastically revamped its subsidy system, suddenly raising the price of diesel by more than 50%, and is even considering reducing gasoline subsidies.
The price of diesel was maintained at the market price, but the method was changed to provide direct subsidies to selected beneficiaries.
Bloomberg News said that Malaysia is having difficulty managing its finances after the COVID-19 incident and is trying to reduce its fiscal deficit, which reached 5% of gross domestic product (GDP) last year, to 3% by 2026-2028.
According to a Bank of America (BoA) report, Malaysia's fuel subsidies amounted to 35 billion ringgit (about 10.3 trillion won), equivalent to 2% of last year's GDP.
HSBC predicted that Malaysia's inflation rate was 1.8% from January to May this year, will reach 2.7% annually, and will rise to 3% next year.
At the same time, contrary to previous observations that the central bank would cut interest rates by 0.25 percentage points early next year, the possibility of freezing or raising them for a long period of time has increased.
Malaysian Prime Minister Anwar Ibrahim defends the policy, citing the fact that international credit rating agencies have maintained credit scores, but even ruling party lawmakers are criticizing the government, saying that businesses are closing down due to the burden of fuel costs.