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7 Jun 2024

Econ Digest

Inflation hit the highest level in 13 months at 1.54% YoY in May 2024; Inflation is projected to return to BOT’s target range during the remainder of 2024

คะแนนเฉลี่ย

Thailand’s headline inflation continued to rise for the second consecutive month and hit the highest level in 13 months at 1.54%YoY in May 20234. This is due to:
  • Electricity costs increased due to the low comparison base in the same period of the previous year, resulting from the government’s temporary measure to subsidize electricity prices.
  • Domestic oil prices increased in line with global crude oil prices, coupled with a gradual increase in the domestic retail diesel prices.
  • Prices of fresh vegetables, fresh fruits and chicken eggs increased due to extremely hot weather resulting in reduced market supply.
  • Headline inflation that excluded fresh food and energy prices in May 2024 was stable, compared to the previous month at 0.39%YoY, reflecting that the increase in inflation was primarily a result of energy and agricultural product prices. Meanwhile, inflationary pressure from domestic demand remained limited.
  • During the first 5 months of 2024, Thailand’s average headline inflation was -0.13% YoY, and the average core inflation was 0.42% YoY.
         Looking ahead to the remainder of 2024, KResearch expects that headline inflation will lean towards the MPC’s target range of 1-3%, while maintaining the projection for 2024 headline inflation at 0.8% on average. It is anticipated that inflation will increase at a slower rate in June 2024, compared to that reported for May 2024, because the low base effect from electricity costs may diminish and the power tariffs are capped at THB4.18 per unit from May to August. Additionally, vegetable and fruit prices are set to decline after the end of the extreme heat and the onset of the rainy season. Looking ahead to the second half of 2024, average headline inflation is expected to stay at 1.0% during the third quarter of 2024 and may accelerate to about 2.0% during the fourth quarter of 2024 due to the low base from last year. In addition, the government’s decision to gradually float domestic energy prices amid the high debt burden of Oil Fuel Fund Office (OFFO) and the Electricity Generating Authority of Thailand (EGAT) may ease pressure on the MPC to cut its policy rate.

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Econ Digest

inflation