Ft Article On Thai Inflation Data

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http://www.ft.com/cms/s/0/011242e4-784b-11dd-acc3-0000779fd18c.html

Thai data fail to brighten horizon

By Amy Kazmin in Bangkok

Published: September 1 2008 18:36 | Last updated: September 1 2008 18:36

Thailand reported on Monday that inflation – which had hit a 10-year high of 9.2 per cent in July – fell to 6.4 per cent year-on-year in August.

While declines in fuel prices helped, analysts said the lower than expected reduction stemmed from a Bt47bn ($1.4bn, €940m, £760m) government package that provided free water and electricity for low-income households, and free public transportation and third-class train tickets.

The new data came as Moody’s, the credit ratings agency, warned that the escalating confrontation between Samak Sundaravej, prime minister, and the rightwing People’s Alliance for Democracy posed a threat to Thailand’s long-term economic stability.

The situation deteriorated further on Monday after Thailand’s state enterprise unions called for a nationwide strike in support of the disruptive wave of the PAD-led anti-government protests.

In its statement, Moody’s said Thailand’s economic fundamentals remained strong enough to justify the current “stable” outlook on its Baa1 sovereign rating, despite suggestions of stress on its external position amid the deepening crisis.

But Thomas Byrne, a Singapore-based senior vice-president at Moody’s, said the political turbulence, combined with a mixed economic performance, “is clouding the economic horizon, making a restoration of investor confidence doubtful in the near future”.

The PAD also wants to see Thailand’s electoral democracy replaced by a new system that would have a parliament with 70 per cent appointed members and only 30 per cent elected members, arguing that Thai democracy has been corrupted by vote-buying.

In a move to oust the government, PAD members have occupied the Government House compound for seven days, disrupted rail services, and forced the weekend closure of three provincial airports, a blow to Thailand’s crucial and tourism sector, which accounts for 6 per cent of GDP.

A state enterprise union leader said an estimated 200,000 state workers from the aviation, telecommunications, electricity, ports and water supply would strike on Wednesday if Mr Samak did not resign.