Thailand: Office sees inflation slowing in remaining months of year

The Trade Policy and Strategy Office estimates inflation has already peaked and should decelerate in the remaining months of the year.

According to Ronnarong Phoolpipat, director-general of the office, the inflation rate is expected to ease in the remaining months now that most product prices have been marked up, in line with rising production costs.

The government recently approved extensions of the diesel tax cut for two more months and the electricity bill subsidy until December, in an attempt to mitigate the impact of high energy prices.

Mr Ronnarong said overall oil prices are likely to stabilise while the daily minimum wage, which is scheduled to rise on Oct 1, the baht’s weakness and the benchmark interest rate hikes by the Bank of Thailand are expected to have little impact on the inflation rate.

The Commerce Ministry projects inflation at around 5% in the fourth quarter and in a range of 5.5-6.5% (averaging 6%) for the whole of 2022. It also forecasts the baht to move in a range of 36-38 to the US dollar this year.

However, he said there are still factors that must be monitored such as volatile global energy prices, heightened geopolitical tensions, the impact of ongoing floods in the country, the continuing weakness of the baht and the recovery pace of domestic demand and tourism.

On Sept 5, the Trade Policy and Strategy Office reported that headline inflation, gauged by the consumer price index (CPI), edged up to 7.86% year-on-year in August after a 7.61% mark in July, 7.66% in June, 7.1% in May and 4.7% in April.

The main contributor was energy prices, which rose 30.5% from August last year.

Although gasoline prices dropped from a month earlier, prices increased for diesel, liquefied petroleum gas and electricity, which are used for transport and production.

In addition, the prices of services such as public transport fares and tuition fees increased.

Prices of non-food and beverages rose accordingly by 6.83% year-on-year, according to the office.

Prices of food and non-alcoholic drinks also increased by 9.35% from August last year, especially for fresh vegetables such as chillies, spring onions and Chinese kale as several crop areas were damaged by floods.

The prices of pork, fresh chicken, eggs, seasonings and condiments, and prepared food also rose in line with higher costs of production and transport.

The higher inflation rate in August was also attributed to rising demand and last year’s low base.

Meanwhile, core CPI, which excludes raw food and energy prices, saw a year-on-year rise of 3.15% in August, accelerating from 2.99% in July. For an eight-month average, CPI rose by 6.14% from the same period of last year, with core inflation increasing by 2.16%.