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1 Sep 2009

Thai Economy

End of Negative Inflation Draws Near, No Pressure from Demand (Business Brief No.2618)

คะแนนเฉลี่ย
The inflation rate released by the Ministry of Commerce shows that Headline Inflation fell 1.1 percent YoY in August 2009, improving over the contraction of 4.4 percent in July, being the deepest contraction in 18 years (since the historical recording of inflation rate figures was begun). The Consumer Price Index rose to 0.4 percent MoM due to higher domestic oil prices. Nevertheless, Core Inflation rate for August was 0.2 percent YoY, remaining unchanged MoM (for the second consecutive month). Over 8M09, Headline Inflation was 1.9 percent and Core Inflation was 0.4 percent YoY.
Headline Inflation began to show a decelerating contraction which reflects Thailand's negative figures in inflation will soon bottom out. Government measures to relieve the cost of living by freezing oil prices will gradually increase domestic inflation in the next few months. KASIKORN RESEARCH CENTER (KResearch) expects that the average Headline Inflation rate for 3Q09 will improve to -2.1 to -2.2 percent YoY, from the 2.8 percent contraction in 2Q09. Due to a low base effect, Headline Inflation at the end of this year may rise and accelerate next year, when the government might cancel their relief measures. KResearch expects that the average Headline Inflation rate for 2009 may be in contraction at (-)0.4-(-)0.9 percent. Meanwhile, it could surge to 3.0-5.0 percent in 2010.
Core Inflation has remained unchanged over the previous two years reflects that there has been no pressure from domestic spending (excluding the impact of higher oil and farm produce prices, especially in fresh food). KResearch projects that Core Inflation in 2009 will be 0.0-0.5 percent, against 2.4 percent in 2008 due to the economic downturn. However, it is expected that the economic recovery will raise inflation to 1.5 -2.5 percent.

However, there are many factors that should be monitored, such as the trend in commodity prices, particularly sugar that has risen considerably. In addition, we have to keep an eye on the world economic recovery, oil price trends, Chinese authorities' regulations and measures to supervise loan approvals among the financial institutions and the Thai government's release of farm produce stockpiles that may affect product prices in the future.

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Thai Economy