Inflation in 2010 is expected to be higher than the previous year despite the subdued inflation rate during February and April. Headline Inflation for April 2010 increased by 3.0 percent YoY, but declined from the 3.4 percent in March – slowing for the third successive month – after touching a 16-month high of 4.1 percent in January.
Meanwhile, domestic demand-pull inflation may become benign over the remainder of this year due to ebbing consumer spending plagued by the political unrest. However, inflationary pressure, especially supply-driven inflation caused by an upward trend in global oil and commodity prices, may accelerate during 2H10.
Private consumption, which has improved steadily, is expected to reach 3.9 percent in 1Q10, the highest level in four years. However, domestic political uncertainties may be a major threat to the Thai economic recovery, especially in consumption, investment and possibly public spending. Rising inflationary pressure amid the slowing economic environment may crimp consumption, going forward.
KASIKORN RESEARCH CENTER (KResearch) forecasts that Thailand's headline inflation in 2010 may be in a range of 3.0-4.0 percent, up from the (-) 0.9 percent contraction in 2009. The Core inflation rate is also projected to rise to 1.5-2.0 percent in 2010, driven largely by the supply side, over the 0.4 percent in 2009.
With the rising prices and heightened economic risk, the government's policy may have to focus on stimulating the economy and maintaining stability in consumer purchasing power to ensure the sustainability of the economic revival, especially amid the political problems and global implementation of ‘exit strategies' from stimulus efforts in response to the continuing global turnaround.
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