Cost of living set to jump this year

BASIC GOODS

Cost of living set to jump this year

Consumers face price hikes for products tied to oil prices

Published on January 8, 2008

Consumers should brace for a higher cost of living throughout 2008 as several manufacturers are pressing for approval for second-round price increases in the first quarter amid rising oil prices.

Palm and soybean oil manufacturers are now waiting for the Internal Trade Department's approval to increase their prices in the second round. If approved, a bottle of palm oil would rise to Bt50 from Bt43.50. The price was jacked up Bt5.50 a bottle late last year from Bt38.

The Soybean and Rice Bran Processors' Association also asked for similar permission to raise the price of soybean oil. Without a specific target this time, soybean oil was increased in December from Bt40 to Bt45.50 a bottle.

Sources in the food industry said consumer products tended to raise their prices along with the prices of raw materials like vegetable oil, milk and sugar. It is reported that 40 food and drink products could ask for hike approvals in the first quarter.

Phiphat Phaniangwet, executive director of Thai President Foods - makers of Mama instant noodles - said noodle manufacturers could face wheat flour shortages aside from the sharp hike in flour prices. He anticipated periodic shortages of such products in the near future.

Paisal Chongbanyatcharoen, president of the dairy affiliate CP-Meiji Co, told Krungthep Turakij that the company had recently raised the retail price of yoghurt by Bt2 to Bt12 a cup. As milk has risen from Bt14.50 to Bt16 per kilogram, and powdered milk costs rose from US$3,000 (Bt100,320) a tonne to $5,000, its dairy product prices have also gone up.

Consumers are fortunate the Energy Ministry decided to postpone increasing the price of cooking gas to February, due to the lower operating costs at gas separation plants, stable export prices and baht appreciation.

However, the problem could be heightened if the Finance Ministry decides to raise value-added tax (VAT) from 7 to 10 per cent this year, a move most feared by manufacturers worried that higher taxes would further damage consumer spending.

"Many operators continue to raise their product prices because of skyrocketing oil prices and the rising prices of raw materials," Thai Industries Federation's chairman Santi Vilassakdanont said yesterday.

"Therefore, the new government should be careful if it plans to boost VAT from 7 per cent to be 10 per cent because higher prices will make it difficult to stimulate people's spending."

Pramon Sutivong, chairman of the Board of Trade, which is one of the three private institutions forming the Private Joint Committee, said yesterday that the committee was waiting for the new government's policies in handling high oil prices.

"Though the entire world is suffering from this problem, the ones with better measures will have a competitive edge.

"It's therefore necessary for the public and private sectors to brainstorm on what are the priorities," he said.

Santi said oil prices and the new government's credibility would be the key factors to determine the economic picture in the next three to six months.

"If this year's average oil price is $100 per barrel, production costs will be higher and manufacturers will keep increasing their prices," he said. However, he believes the country's economy will expand 4.5 to 5.5 per cent this year.

Deputy Prime Minister and Industry Minister Kosit Panpiemras said yesterday that the National Economic and Social Development Board had been assigned to come up with measures to reduce the pressure on consumers.

The measures would be presented to the new government.

"Oil prices tend to increase continually, while operators need to handle other factors such as the sub-prime mortgage crisis and the weak dollar," Kosit said.

He also told the new government not to ignore Thailand's need to strengthen infrastructure and improve productivity.

Business Desk

The Nation