On February 2, 2009, the Ministry of Commerce announced inflation data for January 2009. The significant points included that:
- Headline Inflation for January 2009 contracted 0.4 percent YoY, which is its first contraction in 9 years. Core inflation was 1.6 percent YoY, dropping from 1.8 percent in the previous month, which was consistent with declines in instant food prices and public bus fares. The Ministry of Commerce has projected that Headline Inflation in 2009 will increase by 0.0-0.5 percent, dropping from 0.0-1.2 percent projected in January.
- Over the next few months, inflation might be pressured by the increases in retail oil prices after the government raises excise taxes on oil products this month. This will cause the Consumer Price Index to increase gradually over previous months. Nonetheless, inflation will likely show a contraction throughout 1H09 versus last year, because it is projected that crude oil and other commodity prices in global markets will remain low. KASIKORN RESEARCH CENTER (KResearch) expects that Headline Inflation in 1H09 will contract 1.0-1.8 percent.
- KResearch also projects that the average Headline Inflation figure for the entirety of 2009 will be in a range of -1.0 to +1.0 percent, dropping from the 5.5 percent rate in 2008. Meanwhile, it is expected that Core Inflation will be around 0.0-1.0 percent, dropping from 2.4 percent in 2008.
This first negative inflation figure experienced in 9 years is partially due to last year's base where prices had largely surged across the board on exorbitant oil prices. However, if inflation falls continuously over the next few months, this will not be favorable to the economic environment later on, when a number of economic figures such as production, exports and the GDP are expected to contract amid expected massive layoffs. As a result, the purchasing power of households will drop in line with lower income. KResearch views that the authorities should prevent the psychological impacts arising from contraction before it adversely affects the confidence of the private sector. Both monetary and fiscal measures should be implemented to ease the anxiety of the people and the business sector.
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