November Inflation 2.2 Percent…Lowest in 14 Months May be 0 Percent by Mid-2009 (Business Brief No.2366)

An important issue that needs a close watch is the Thai economic situation that has come to a critical point. The impacts of financial crisis and global economic downturn have resulted in falling production and employment in the private sector. Meanwhile, deteriorating political conditions domestically have lessened the confidence of international investors, which will hurt the economic outlook in 2009. This situation might increase the risk of deflation in the future. It is expected that inflation in certain months in 2009 will show technical contractions due to comparison against consumer products prices that surged in 2Q08 and 3Q08. If the domestic economy remains sluggish and consumers lack purchasing power due to unemployment, lower income and the inability to access loans, there will be ‘spiral effect' on sales of goods, resulting in stagnant inventories. Tougher competition might force manufacturers to cut prices and reduce their production outputs, thereby increasing unemployment. As a result, the economy will fall into recession. KResearch expects that although the Thai economy might not plunge to that point, we have to be cautious. The authorities should implement measures to prevent recession; otherwise, the problem might be hard to solve.