Thailand: Headline inflation edges up in July

Headline inflation was weaker than expected in July, helped by lower food and energy prices, while the Commerce Ministry projected the inflation rate in the following months until the end of the year to increase by less than 1% a month.

The Commerce Ministry reported on Monday that headline inflation, gauged by the consumer price index, rose by 0.38% year-on-year in July against June’s 0.23% rise.

Poonpong Naiyanapakorn, director-general of the Trade Policy Strategy Office, said the main contributors were a 1.49% year-on-year rise in the prices of food and non-alcoholic beverages.

Items that have seen price rises included fresh vegetables and fruits (lime, ginger, eggplant, rambutan, watermelon, tangerine) and eggs, following a low yield due to turbulence; rice and flour products (glutinous rice, crackers, vermicelli), non-alcoholic beverages (instant coffee, syrup, soft drinks), and dairy products (soymilk, condensed milk, creamer), following high production costs; and prepared food, the prices of which had slightly increased.

Core inflation, which excludes volatile food and energy prices, rose by 0.86% year-on-year in July, decelerating from a 1.32% increase in June.

For the seven-month average, headline inflation rose by 2.19% year-on-year, while core inflation averaged 1.73% for the period.

“Headline inflation in August is expected to slightly increase, supported by growing food prices from low yields due to severe drought; high prices of prepared food; rising fuel prices as oil-producing countries lowered their production; and the Russia-Ukraine war,” said Mr Poonpong.

“However, the high price base in August would limit inflationary growth. Thus, fluctuating fuel prices, drought, the world economic situation and geopolitical conflicts are still adverse factors for Thailand’s inflation that should be closely monitored.”

Given such factors, Mr Poonpong said until the end of the year, it is estimated that inflation will remain below 1% per month, and the annual inflation rate is projected to be within the target range of 1-2% or an average of 1.5%, based on the assumption of GDP growth of 2.7-3.7%, Dubai crude oil at US$71-81 per barrel and an exchange rate of 33.5-35.5 baht per US dollar.

However, if various factors undergo changes or there are risk factors that could impact inflation, such as fluctuations in oil prices, drought, global economic conditions or geopolitical conflict, a review of the target may take place in September, Mr Poonpong said.