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Bangkok Post
Bangkok Post
Business

Inflation expected to peak in third quarter

Thailand's inflation is expected to peak in the third quarter and decelerate in the final quarter, leading the rate for the whole year to move in line with the Commerce Ministry's 2022 target of 6%.

According to Ronnarong Phoolpipat, director-general of the Trade Policy and Strategy Office under the Commerce Ministry, the inflation rate is expected to ease in the final quarter, as oil prices are likely to become stable and the government is scheduled to roll out fresh support measures including an energy subsidy to help alleviate the cost of living for the public during this period.

Such factors will slow the rise of inflation in the final quarter, he said.

"The ministry sees inflation at around 5% in the fourth quarter and a range of 5.5% to 6.5% [averaging 6%] for the whole of 2022," he said.

However, he noted there are still external factors that must be monitored such as heightened geopolitical tensions, the higher cost of imported products driven by the baht's weakness, the US interest rate hike and global energy prices, while domestic fresh food and vegetable prices may be impacted by the floods.

With the daily minimum wage set to rise on Oct 1, Mr Ronnarong said his office also pledges to closely monitor the impact, adding that manufacturers have already prepared to manage their production costs in line with the wage increase.

The Trade Policy and Strategy Office reported yesterday that headline inflation, gauged by the consumer price index (CPI), edged up by 7.86% year-on-year in August after a 7.61% year-on-year rise in July, a rate of 7.66% in June, which accelerated from a 7.1% increase in May and a 4.7% rise in April.

The main contributions were energy prices which rose 30.5% from August last year.

Although gasoline prices dropped from last month, the prices of diesel, liquefied petroleum gas and electricity, which are transportation and production costs, rose. Also, 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.

Prices of food and non-alcoholic drinks also increased by 9.35% from August last year, especially for fresh vegetables (chilli, spring onion and Chinese kale), the prices of which rose due to several crop areas being damaged by floods.

Also, the prices of pork, fresh chicken, eggs, seasonings and condiments and prepared food increased in line with higher costs of production and transportation.

Mr Ronnarong said the higher rate of inflation in August was also attributed to rising demand and last year's low base.

According to Mr Ronnarong, the prices of some items decreased such as rice, glutinous rice, men's clothing, ironing starch, floor cleaner, electrical appliances (irons, air conditioners, washing machines) and mobile phones.

Meanwhile, core CPI, which excludes raw food and energy prices, saw a year-on-year rise of 3.15%, accelerating from 2.99% in July.

Compared with the previous month, inflation in August rose only by 0.05% from July, as most prices had gradually increased for a while.

Items with rising prices were fresh vegetables (Chinese kale, morning glory and Chinese cabbage), tangerines, guavas and eggs. Meanwhile, the prices of rice, vegetable oil, surgical masks and gasoline fell.

For an eight-month average, CPI rose by 6.14% from the same period of last year, with core inflation increasing by 2.16%.

Thanavath Phonvichai, president of the University of the Thai Chamber of Commerce, said given the rise in the inflation rate in August, the Bank of Thailand is expected to continue raising its policy interest rate to tame rising inflation, with two hikes possible this year of 0.25 basis points for each.

He said the policy interest rate will continue to be raised until next year.

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