Thailand's inflation rate lingered in negative territory throughout 2015 amid falling oil prices. In December 2015, Headline Inflation stood at (-)0.85 percent YoY, following (-)0.97 percent YoY in November. As a result, our 2015 inflation averaged in contraction for the first time in six years at (-)0.90 percent, being the lowest rate since at least 1977 (the Ministry of Commerce website provides Consumer Price Index data for the base year 2011, dating back to 1976).
KResearch expects that negative inflation will prolong throughout 1Q16, due to low oil prices, as well as lower transportation costs and smaller fuel tariff (Ft) surcharge on electricity. Nonetheless, inflation may rebound slightly into positive territory in 2Q16 and continue to rise in 2H16 (versus a low 2H15 base). However, average 2016 inflation may be lower than KResearch's initial projection of 1.2 percent since global oil prices have become heavily volatile.
Meanwhile, inflation and consumer goods prices may fall during the next 2-3 months in line with supply factors and variables concerning production costs, which would then tend to ease pressure on consumer spending power. The trend does not look threatening if domestic economic activity continues to recover and benefit from government stimuli.
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