Thailand: Inflation to ease as food, fuel prices fall

Thailand’s headline inflation is expected to decelerate this month after growing during January and February.

Wichanun Niwatjinda, deputy director-general of the Trade Policy and Strategy Office (TPSO), said the main contribution would be lower prices for fresh food and fuel as global market prices declined last year, in addition to a high price base in March.

Moreover, lower exports from weak demand and tightening monetary policies would put pressure on inflation’s expansion. However, higher domestic electricity bills when compared with the previous year and rising LPG prices from March 2023 onwards, a recovery of tourism, and good prices for agricultural products would raise inflation.

In addition, geopolitical conflicts and severe drought may impact the world market prices of consumer goods, and would finally affect domestic prices of goods and services.

“Inflation in Thailand has been steadily decreasing. The trend is likely to become clearer in the middle to end of the year, and from October onwards, Thai inflation may be close to 0% or even negative if oil prices continue to decrease during that period,” Mr Wichanun said.

“The inflation target for the whole year is still set at 2-3%, but it may be adjusted if assumptions change after the first-quarter figures are released.”

The Commerce Ministry on Tuesday reported headline inflation, gauged by the consumer price index (CPI), rose by 3.79% year-on-year in February, decelerating for the second straight month, and was the lowest rate in 13 months, following a 5.02% year-on-year rise in January, and 5.89% year-on-year growth in December 2022.

Poonpong Naiyanapakorn, director-­ general of TPSO, attributed the easing inflation rate mainly to a deceleration of energy and some food prices, especially prepared and fresh food. Also, a high-price base in 2022 resulted in a limited expansion of inflation.

In February 2023, the country’s inflation rate was the 29th lowest out of 139 economies. The rate was considered relatively low compared with other economies including the US, UK, Italy, Mexico, India, South Korea, and some Asean countries such as Laos, the Philippines, Singapore and Indonesia.

Core inflation, which excludes raw food and energy prices, rose by 1.93% from February last year, decelerating from a 3.04% rise in January and 3.23% growth in December.

On a monthly basis, the CPI dropped by 0.12% from the previous month, mainly due to a 0.41% drop in food and non-alcoholic beverages, following a price drop in pork, chicken, rice, fresh vegetables and fruit (kale, coriander, spring onion, mango, tangerine and watermelon), which was due to higher supply.

Prices of vegetable oil, dried or shredded coconut, and seasonings also decreased.