Headline inflation for December 2009 accelerated to 3.5 percent YoY. However, KASIKORN RESEARCH CENTER (KResearch) holds the view that the current inflationary pressure is not yet a hindrance to the economic recovery. The higher inflation rate stems chiefly from technical factors caused by the low base effect of comparisons with December 2008. Month-on-month (MoM), it was found that Headline Inflation in December 2009 dropped from the level in November. In addition, the Core CPI, excluding food and energy prices, had remained unchanged (at 102.7) since October, demonstrating that there had been little inflationary pressure caused by consumer spending. Headline Inflation overall for 2009 declined by 0.9 percent after rising 5.5 percent in 2008, whereas Core Inflation rose 0.3 percent, lower than the 2.4-percent increase in 2008.
In 2010, Thailand may be threatened by increasing inflationary pressure amid the possibility of exorbitant commodity prices due to ebbing domestic supplies in the world's major producing countries. Meanwhile, crude oil and other commodity prices are likely to increase at a faster pace amid a more obvious global economic recovery in 2010. Nonetheless, the extension of the five cost-of-living relief measures for another three months from the end of December 2009 should help considerably in taming inflationary pressure.
KResearch expects that Headline Inflation in 2010 may rise to 3.0-4.0 percent against the (-) 0.8-percent drop in 2009. If the deadline (for the relief measures) of March 2010 is not extended, then Headline Inflation may climb to some 3.4-4.0 percent later on. However, if it is extended for an additional three months to the end of June, then Headline Inflation may be only 3.2-3.8 percent. If these assistance measures expire at the end of September, then Headline Inflation would increase only 3.0-3.5 percent. As for Core Inflation in 2010, it is expected to be about 1.5-2.5 percent, up from the estimated 0.3 percent in 2009.
On the monetary policy front, KResearch views that Headline Inflation may soar to around 4 percent YoY in January 2010 due to the low base effect of 2009. However, Core Inflation will likely remain below 0.5 percent YoY, with the average not exceeding 1.5 percent YoY in 1H10. Such inflation levels, which are moderately higher than the current Thai policy rate of 1.25 percent, may provide some leeway for the Bank of Thailand toward adopting monetary policy to support the economic recovery. The BOT policy rate is therefore expected to be kept unchanged throughout 1H10.
Annotation
This research paper is published for general public. It is made up of various sources. Trustworthy, but the company can not authenticate. reliability The information may be changed at any time without prior notice. Data users need to be careful about the use of information. The Company will not be liable to any user or person for any damages arising from such use. The information in this report does not constitute an offer. Or advice on business decisions Anyhow.