Thailand
Thailand: Global oil price increases prop up inflation outlook
The Commerce Ministry has raised its projection for inflation this year to between 1.5% and 2.2% from 1.5-2%, mainly because of the hike in global crude oil prices.
The Consumer Price Index (CPI) rose 0.76% in March year-on-year, driven by the global oil price rise and an increase in fresh food and vegetable prices, but eased from February when the index rose by 1.44%.
“Inflation is likely to continue to rise in the following months as a clear sign of domestic economic recovery, and the continuing rise in oil prices,” said Pimchanok Vonkorpon, director of the ministry’s Trade Policy and Strategy Office.
March’s year-on-year increase in consumer prices, based on 422 products and services, was mainly driven by the rise of crude oil price, which increased 13.7% from the same period last year.
Core inflation, which excludes volatile fuel and food prices, rose 0.62% year-on-year, and 0.04% from February to March.
The first quarter of this year saw consumer prices rise 1.25% year-on-year mainly because of the hike in tobacco and alcohol retail prices by 5.49% from a year before, an increase in transport and telecommunication costs by 4.53%, as well as a hike in the prices of non-alcoholic beverages.
On a monthly basis, the fall in consumer prices from February was attributed to a 3.2% fall in oil prices, which resulted in reductions in retail prices four times last month.
The ministry projects Dubai oil prices will be in a range of US$50-60 per barrel and the Thai economy will grow within 3-4%, with the expectation the baht will depreciate in the coming months to an average of 35.5-37.5 against the US dollar for the entire year.
Last month, the food and beverage price index was up 0.68% year-on-year, while the non-food index headed up 0.83%.
Siam Commercial Bank’s Economic Intelligence Center (EIC) projects inflation this year will average at 1.9% year-on-year for the whole year, mainly driven by the gradually improving economy, while oil prices will continue to rise slowly to $55 a barrel, or 28% higher than average prices last year.
SCB’s researchers also anticipate a depreciating trend for the Thai baht to 36-37 baht to the dollar by the end of the year.
Core inflation is seen as part of the recovery and an indicator of improving household purchasing power. Farmers’ income rose by 16% in the first two months of the year, led by the hike in rubber and sugar cane prices.
The EIC believes the country’s policy interest rate is likely to be maintained at 1.5% as inflation this year is still relatively low and it is still within the core target inflation framework outlined by the Bank of Thailand, capped at 2.5% plus or minus 1.5%.
“The low rate is still essential as there are still a number of risk factors that might interrupt the economy’s fragile recovery,” stated the EIC.
Source: http://www.bangkokpost.com/business/news/1226616/global-oil-price-increases-prop-up-inflation-outlook