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2 May 2008

Thai Economy

Accelerating Inflation: Government Policies at a Crossroads (Business Brief No.2151)

คะแนนเฉลี่ย
The latest Headline CPI Inflation of April jumped 6.2 percent on a year-on-year basis – the highest level in 23 months – which was higher than the 5.3 percent as forecast by most analysts. The average Headline CPI Inflation during the first four months of 2008 standing at 5.3 percent reflected that the Thai economy remained confronted with persisting inflationary pressure. Since the end of 2007, accelerating inflation has come mainly from surges in fuel and food prices that included palm oil, pork and rice, resulting in soaring prices of goods and services across the board.
Even so, it is widely hoped that these escalating prices may only be a short-term phenomenon which may become less severe, particularly if global oil prices do not climb further due to the end of tourism season in the Western hemisphere, and slowdowns in the world's economic powerhouses. In addition, surges in farm goods prices are expected to be capped by possible rising supplies of farm produce into the market and recovery in the US Dollar against other major currencies that may lead to corrections in farm produce prices – a positive sign that was seen last week. However, KASIKORN RESEARCH CENTER (KResearch) is of the view that the Thai policymakers should not be complacent and should prepare for a worst-case scenario, especially if the prices of goods and services do not ease as hoped. To this end, proper actions should be taken in a timely manner to cushion the impacts on businesses and the general public that would be quite vulnerable to such forces.
KResearch is of the view that there are both pros and cons in our policy options, to be implemented either independently or collectively, to cope with the runaway prices of goods. Actions should be taken with prudence. Among the policy alternatives in question are hikes in minimum wages and civil servants' salaries, controls on energy consumption, especially petroleum products, and the implementation of tightening monetary and fiscal policies.

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Thai Economy