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23 Dec 2019

Thai Economy

2020 Inflation May Remain Steady at 0.7% amid Drought and Rising Daily Minimum Wage (Business Brief No.3839)

We at KResearch expect that average headline inflation may stand at 0.7 percent or within 0.4-0.9 percent in 2020, which would be at the same par as in 2019, amid risks stemming from drought and rising daily minimum wages. Factors that may exert upward pressure on 2020 headline inflation include:

  • Raw food prices, which are projected to increase during 1H20 because of water scarcity in the agriculture sector as a result of drought and delay in rainfall during 2019.
  • Hikes in daily minimum wage by THB5-6 may indirectly push up inflation by 0.05 percent.
  • Other factors, namely new sugar tax rate, which came into effect in October 2019, plus land and building tax under the Land and Building Tax Act, B.E. 2562 (2019), which is scheduled to be enforced in August 2020, because it may drive up rental costs of homes/condominiums during 4Q20.

 

However, eroding consumer purchasing power resulting from the sluggish economy may exert downward pressure on demand-push inflation and inhibit entrepreneurs to raise product prices amid intense pricing competition, in particular in the e-commerce business. Other factors that will likely dampen inflation include sagging demand and the fact that people are saving more as Thailand is moving towards an aging society while prices of electronic products have declined due to technological advancements. 



Thai Economy