Inflation set to slip below 0.8% mark

Inflation may slip below the projected average of 0.8% (a range of 0.4-1.2%) because of relatively poor consumption and low oil prices caused by the Covid-19 epidemic, according to the Commerce Ministry.

Pimchanok Vonkorpon, directorgeneral of the Trade Policy and Strategy Office, said yesterday the global economic slowdown and coronavirus outbreak have substantially reduced income, purchasing power and demand for goods and services.

“This may keep inflation for the year below 0.8%,” said Ms Pimchanok.

The Commerce Ministry reported yesterday consumer prices, a gauge of headline inflation, rose by 0.74% yearon-year in February, boosted by food and non-alcoholic beverages.

The rate decelerated from January’s eight-month high of 1.05%, which had been driven by higher raw food and energy prices.

The major contributors in February were higher prices in all categories of food and non-alcoholic beverages, especially for raw food, prepared food, and seasoning and condiments, partly due to the drought.

Non-food and beverages prices edged down 0.01% in February, caused by a drop in prices for transport and communication, retail fuel, and apparel and shoes.

On a month-to-month basis, consumer prices in February fell 0.08% from January.

Ms Pimchanok said prices excluding food and energy (core inflation) rose by 0.58% in February, quickening from 0.47% in the previous month.

For the two-month average, headline inflation and core inflation were 0.89% and 0.53%, respectively.

She said the decelerating inflation stemmed from the recent global economic slowdown and concerns that the coronavirus epidemic would hit tourism, transport, retail and wholesale trade, as well as other related manufacturing and services.

Considering other related indicators, however, promising signs could be seen in agricultural prices and farmer income, especially for oil palm.

In addition, revenue from domestic value-added tax and private consumption has continued to rise.

January exports were higher for the first time in five months. Those figures show the economy has strong potential to recover when circumstances return to normal, Ms Pimchanok said.

Thanavath Phonvichai, president of the University of the Thai Chamber of Commerce, said given inflation rates in the first two months, the economy has yet to see any signs of picking up.

He expects the consumer price index to drop over the next 1-2 months thanks to a tepid tourism sector affected by the Covid-19 outbreak.

“A close watch of the rates in March and April is needed,” said Mr Thanavath. “The overall economic condition is likely to become stagnant if the rates keep falling during the next two months.”