Thailand: Cabinet approves energy support, wage hikes

The cabinet on Tuesday agreed to extend a diesel tax cut for two months and extend an electricity subsidy until December to mitigate the impact of high energy prices, the government said.

The cabinet approved extending the excise tax rebate of 5 baht per litre on retail diesel prices for two months to Nov 20, according to government spokeswoman Traisuree Taisaranakul. The move will cost the administration about 20 billion baht in lost revenue, she said.

“The government may lose revenue from extending the tax cut, but we need to do it to freeze diesel prices,” Anucha Burapachaisri, a government spokesman, told a briefing. “If we allow domestic prices to rise in line with global oil prices, it will raise the cost of living, which will hinder the economic recovery.”

Headline inflation is likely to stay above Bank of Thailand’s target range of 1% to 3% next year due to high energy and food prices that may prompt producers to pass through increased costs, according to Siam Commercial Bank Plc.

The retail price index may average 6.1% this year but will ease only to about 3.2% next year, the bank’s research group said Tuesday. The government also approved minimum wage increases from Oct 1.

Minimum wage hike

The government on Tuesday also approved minimum wage increases from Oct 1.

Finance Minister Arkhom Termpittayapaisith said the increases, an average of 5% and the first hike in more than two years, should not affect the country’s economy much. 

The economy is still expected to expand 3.5% this year, driven by increased exports, tourism and government support measures, he told reporters.