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2 Oct 2017

Thai Economy

2017 Inflation at 0.8%, Bolstered by Soaring 4Q17 Inflation (Business Brief No.3706 Full Ed.)

Headline inflation climbed to 0.86 percent YoY in September, versus the 0.56 percent pace reported for 8M17. That figure represents the steepest MoM increase in 66 months since March 2012 in line with rising electricity costs, prices of energy, tobacco products and alcoholic beverages.

The prices of several products and services are set to increase during 4Q17, due to:

- - Higher energy prices, buoyed by rising Dubai crude oil prices at USD50-53/barrel in 4Q17, versus an average of USD47.9/barrel reported for 4Q16, will likely increase domestic retail oil, LPG and NGV prices.

- - Public transportation fare hikes, including BTS fares, rising THB1-3/person/trip, effective October 1, 2017. Also, the termination of the free-ride program on selected Bangkok city non-airconditioned buses and third-class inter-province trains with the introduction of the government's new e-welfare program for low-income earners, will drive up the public transportation price index in the inflation basket.

- - New excise tax restructuring will raise the Consumer Price Index for October, too. Thus, KResearch is of the view that such increases will firm up headline inflation by 1.0 percent in 4Q17, though its effect on consumers should be limited, partly due to various measures introduced by the government to assist low-income earners and the fact that most consumers have become cautious toward spending. Since most businesses should keep product/service prices steady, KResearch therefore keeps our headline inflation forecast steady at 0.8 percent for 2017.

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