8-8-2023 (BANGKOK) In a surprising turn of events, headline inflation for the month of July proved to be milder than initially projected. The Thai Commerce Ministry unveiled data on Monday, indicating that the Consumer Price Index (CPI) only marked a 0.38% year-on-year rise, compared to the previous month’s 0.23% increase. This unexpected deceleration was largely attributed to a decrease in food and energy prices.
Poonpong Naiyanapakorn, the Director-General of the Trade Policy Strategy Office, highlighted the principal contributors to this moderation. Notably, there was a 1.49% year-on-year uptick in the cost of food and non-alcoholic beverages. Factors behind this incline included a rise in the prices of fresh vegetables and fruits, such as lime, ginger, eggplant, rambutan, watermelon, and tangerine, as well as eggs. These items faced supply constraints due to turbulence. Furthermore, the cost of rice and flour products, including glutinous rice, crackers, and vermicelli, saw an upward trajectory. The realm of non-alcoholic beverages witnessed a similar trend, impacting items like instant coffee, syrup, and soft drinks. Dairy products such as soymilk, condensed milk, and creamer also faced elevated production expenses, driving their prices higher. Additionally, prepared food observed a slight price elevation during this period.
The report also underscored core inflation, which eliminates the influence of volatile food and energy prices. Core inflation registered a 0.86% year-on-year increase in July, a slowdown from the 1.32% escalation witnessed in June.
Cumulatively, over the span of seven months, headline inflation showed a 2.19% year-on-year surge. In parallel, core inflation exhibited an average increase of 1.73% for the same duration.
Providing insights into the upcoming months, Poonpong Naiyanapakorn offered his prognosis. He projected a modest uptick in headline inflation for August, propelled by soaring food prices due to diminished yields stemming from severe drought conditions. The rising cost of prepared food and fuel prices, resulting from adjustments in oil production by oil-producing nations and the ongoing Russia-Ukraine conflict, are also anticipated contributors to this forecasted increment. Nevertheless, the elevated price base from August onwards is poised to restrain the pace of inflationary growth.
In light of these dynamics, Poonpong Naiyanapakorn indicated that until the conclusion of the year, inflation is projected to maintain a monthly increase of less than 1%. The annual inflation rate is envisaged to remain within the targeted range of 1-2%, with an average of 1.5%. These projections hinge on certain assumptions, including GDP growth ranging from 2.7% to 3.7%, Dubai crude oil prices at US$71-81 per barrel, and an exchange rate of 33.5-35.5 baht per US dollar.
Nevertheless, the Director-General acknowledged the inherent uncertainties that could influence these projections. Factors such as fluctuating oil prices, ongoing drought conditions, global economic circumstances, and geopolitical conflicts could necessitate a reassessment of these targets. A review of the inflationary outlook may be conducted in September, contingent on any substantive alterations or emerging risk factors.
