Government move to gradually reduce energy subsidies could cause Thai inflation to return positive in 2Q24 (Business Brief No.4052)

• The government has continually subsidized domestic energy prices due to the impacts of the COVID-19 pandemic since 2020, and the sharp rise in global energy prices caused by the Russia-Ukraine conflict in 2022. The government’s energy subsidies have resulted in lower domestic inflation than would have occurred without such measures.
• If the price subsidy programs were to continue without adjustment, the financial burdens of the Oil Fuel Fund and the Electricity Generating Authority of Thailand could once again reach the designated maximum levels that were previously seen in 2022.
• Given the government’s recent move towards a gradual reduction in energy subsidies and allowing prices to accurately reflect actual costs, KResearch anticipates that headline inflation in Thailand will return to positive territory in May, and is expected to average 0.8 percent in 2024.