Energizing savings: Government’s cost-cutting shock eases financial pressure

The Employers’ Confederation of Thai Trade and Industry (EconThai) expressed approval for the Thai government’s latest move to slash both electricity and diesel costs. This initiative is aimed at alleviating the financial pressure on households and businesses.

The reduction in power tariff was confirmed yesterday, following Prime Minister Srettha Thavisin‘s policy statement announcement in parliament, reports Bangkok Post.

The new power tariff is set at 4.104 baht per kilowatt-hour, a decrease from the previous rate of 4.45 baht. Additionally, a price ceiling of 30 baht per litre has been established for diesel, a slight drop from the current 31.94 baht per litre.

Vice-chairman of EconThai, Tanit Sorat, believes that these reductions will prove beneficial for businesses, particularly those in the logistics sector, as it will enable cost-saving. He also said that consumers should expect a stable price for goods.

“Such measures will ultimately deter an increase in the price of goods, which favours households.”

Despite this, Sorat also voiced concerns about the potential negative impact these measures could have on the state budget, potentially creating future financial problems for citizens.

The updated power tariff will be applicable from September to December, replacing the current rate. The revised diesel retail price is due to come into effect from September 20.

In a bid to lower the diesel price to 30 baht per litre, the Cabinet has decided to reduce the diesel excise tax by 2.50 baht a litre from September 20 until the end of the year. This reduction, Deputy Finance Minister Krisada Chinavicharana said, would lead to a decrease in government revenue collection by up to 15 billion baht. Nevertheless, the state revenue collection for fiscal 2023 is projected to surpass its target by over 100 billion baht.

Bangkok Bank President, Chartsiri Sophonpanich, anticipates that the new government’s economic policy will stimulate the economy, foster growth and boost the country’s long-term competitiveness.

Somprawin Manprasert, Chief Economist at the Economic Intelligence Center (EIC), however, warns against the potential long-term fiscal burden of large stimulus plans, such as the 10,000-baht digital currency handout scheme, despite their potential short-term benefits.

Manprasert suggests other viable options for reviving the economy during recovery, such as enhancing Thailand’s competitive advantage domestically and internationally and expanding economic opportunities.

The EIC advocates for a long-term economic policy centred on boosting the country’s competitiveness and sustainable growth. It also recommends the government promote fair competition, improve the effectiveness of the 2017 Trade Competition Act, and support Thailand in joining the Organisation for Economic Co-operation and Development (OECD).

The EIC further suggests that the government’s blueprint should drive sustainable economic growth via tax policy reform to reduce inequality and avoid tax policies that may distort business or household decision-making.

The revised economic growth outlook for Thailand this year, as per the EIC’s estimate, has been reduced from 3.9% to 3.1% due to lower-than-expected economic expansion and continued export contraction in the second quarter.

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