Inflation drops for fifth month in a row in February

Headline i nflation i n February decreased by 0.77% year-on-year, the fifth consecutive month of declines, attributed to lower prices of fresh food, especially meat and fresh vegetables, as well as government subsidies for electricity and fuel.

Core inflation, which excludes fresh food and energy, rose 0.43% year-onyear, sliding from 0.52% in January.

Poonpong Naiyanapakorn, director-general of the Trade Policy and Strategy Office (TPSO), said inflation in March is expected to continue the downward trend, falling by 0.7-0.8% on average for the first quarter.

He said the decrease was linked to government measures to ease living costs, including a subsidised power tariff of 3.99 baht per unit for households that have consumption that does not exceed 300 units per month, as well as 4.18 baht per unit for general households.

As for diesel and petrol, the retail price of diesel is capped at below 30 baht per litre until April 19.

The high baseline prices of pork and fresh vegetables in 2023 as well as sluggish economic growth of 1.7% in the fourth quarter last year and 1.9% for the full year will result in a declining inflation rate, according to the office.

However, inflation is expected to increase in May because of low baseline prices that month and the expiration of government subsidies for fuel and electricity on April 19 and April 30, respectively.

Four factors were identified that could contribute to rising inflation. Conflicts in the Middle East have increased prices for consumer products, especially crude oil prices in the global market.

Second, the baht is on a depreciation trend, causing import prices to increase.

Third, fluctuating weather conditions towards the end of the El Niño phenomenon and the beginning of the hot season are likely to impact quantities of agricultural products and their production costs.

Fourth, the continuous expansion of the tourism sector has pushed up the prices of products related to tourism, particularly airfares.

The TPSO predicts headline inflation for 2024 of -0.3% to 1.7%, with a midpoint of 0.7%. This rate aligns with the economic outlook, though if circumstances change, there will be a reconsideration, said Mr Poonpong.