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2 Oct 2012

Thai Economy

Upward Inflationary Trend Seen in 4Q12 (Business Brief No.3358 Full Ed.)

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Thailand's September Headline Inflation hit a 6-month high at 3.38 percent YoY, tagging along with Core Inflation that climbed to its highest level in three months at 1.89 percent YoY. The steeper September increases are attributed not only to a low 2011 base, but also hikes in the electric utility Ft charge and excise tax on alcoholic beverages and cigarettes.
Regarding the inflation outlook, we at KResearch expect that a push-through of production costs following the end of the Ministry of Commerce's price control measures, plus erratic weather patterns, will likely drive up consumer product prices gradually. Other key factors that should be monitored closely will include the government's plan to restructure energy prices – particularly diesel fuel, which is being subsidized via an excise tax cap at THB0.005/liter – plus LPG as used by the transport sector. We are of the view that these measures will likely steepen costs for manufacturers and consumers, in turn, raising inflation in 4Q12, and perhaps into 2013.

KResearch expects that Headline Inflation may average 3.3 percent for this entire year, or be somewhere within 3.2-3.5 percent, thereafter rising to perhaps 3.8 percent in 2013, or within 3.5-4.2 percent.

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Thai Economy