Thailand
Thailand: Rising oil prices expected to drive inflation in 2018
The government’s forecast for inflation this year is 0.6-1.6% on expected increases in oil prices after 2017 saw inflation of 0.66%.
The state welfare scheme, relatively high household debt and lower farm prices are expected to keep a damper on inflation prospects.
Pimchanok Vonkorpon, director-general of the Trade Policy and Strategy Office, said the forecast is based on an economic growth rate of 3.5-4% this year, Dubai oil prices of US$50-60 per barrel and an exchange rate of 33-35 baht to the US dollar.
“We expect overall product prices to inch up this year on higher expected oil prices, which will make oil-related products and transport services more expensive this year,” she said. “The economy is expected to continue growing this year based on growing exports, recovering household expenditure and expanding private investment.”
Ms Pimchanok said inflation is unlikely to rise much because crop prices have yet to fully recover, while the state welfare scheme, especially the welfare card that gives low-income earners access to subsidised goods, and the Commerce Ministry’s price-control measures have put a lid on living costs.
More importantly, relatively high household debt has put the brakes on price hikes, she said.
The Commerce Ministry reported yesterday that inflation based on the consumer price index (CPI) was 0.78% year-on-year in December, as higher retail fuel prices, rising in line with global oil prices, drove up costs for finished food and non-food items.
Prices dropped 0.08% from November, as fresh foods saw a price drop due to decent supply from good weather, while energy prices also declined slightly on lower cooking gas prices, which dropped in line with global gas prices.
For the whole of 2017, inflation stood at 0.66%, the Commerce Ministry said, compared with 0.19% in 2016, -0.90% in 2015 and 1.89% in 2014.
Core inflation, which strips out oil and seasonal goods, was 0.62% year-on-year in December and 0.56% for the whole of 2017.
Tim Leelahaphan, an economist at Standard Chartered Bank Thailand, said inflation is expected to rise further this year on improving domestic demand and a continued rise in energy prices (which make up more than 10% of the CPI basket).
Source: https://www.bangkokpost.com/business/news/1389894/rising-oil-prices-expected-to-drive-inflation-in-2018