Global Brent crude oil price will likely reach USD90-100/barrel in 2018 because of tight supplies in the global market and strong fuel demand during winter months.
The impact of soaring global crude oil prices on the Thai economy will likely be limited although they may cause inflation to be higher than expected somewhat during 4Q18. Due to the government measure to set ceilings for domestic energy prices, which may help ease the impact of volatile global crude oil prices on the Thai economy somewhat, we at KResearch have decided to keep our 2018 headline inflation forecast steady at 1.1 percent (or within a range of 0.8-1.3 percent) and our 2018 economic growth projection at 4.6 percent (or within a band of 4.3-4.8 percent).
The government policy of maintaining the stability of domestic energy prices hinges on how long high global crude oil prices will last and how much consumers have to shoulder the burden of rising energy prices vis-a-vis financial position of the State Oil Fund.
Based on the assumption of an average Dubai crude oil price at USD85/barrel, we at KResearch have assessed that headline inflation may increase by 0.7-1.1 percent in 2019, though the figure will depend on the government policy of capping domestic energy prices. This coupled with a projected decline in trade balance may shave the Thai GDP growth for 2019 by 0.2-0.4 percent.