Thai Inflation Eases In February

Thai inflation eases in February

BANGKOK, March 1, 2011 (AFP) - Thai inflation slowed marginally in February, the Commerce Ministry said on Tuesday, but economists predict an acceleration on the horizon as government price control measures come to an end.

The consumer prices index rose 2.87 percent from a year earlier, compared with a 3.03 percent increase the previous month.

But the ministry said inflation is likely to spike in the future as several government measures, including limiting the cost of some food staples like eggs and sugar, expire at the end of March.

Thailand, along with other regional neighbours, is battling higher prices as the economy continues to expand, while commodity prices remain on an upward trend.

The Bank of Thailand in January raised interest rates to 2.25 percent, the fourth increase in six months, and economists predict the central bank will opt for a further rise to 2.5 percent when monetary policymakers next meet on March 9.

"The government's subsidies relief scheme and the commerce ministry's prices control helped reduce cost of living," said Commerce Ministry Permanent Secretary Yanyong Phuangrach.

Core CPI, which excludes volatile energy and food prices, rose 1.45 percent from a year earlier, up from 1.32 percent in January.

Phatra Securities economist Thanomsri Fongarunrung told Dow Jones Newswire that the "escalating oil price and raw material price will likely generate a significant impact in April" when some programmes come to an end.

The Commerce Ministry expects inflation to accelerate in the coming months, as there are signs that the prices of many goods will be adjusted upwards, Yanyong said.

But he added while measures to control prices of certain products are due to expire by the end of March, the ministry will ensure that any rise in product prices will be made gradually.

In February, the Thai cabinet agreed to extend subsidies aimed at those on low incomes, including free electricity and public transport, until June.

Yanyong said headline inflation is expected to be around 3.09 percent for the first three months of 2011, while the measure is expected to increase to 3.45 percent in the second quarter and reach as high as 3.6 in the third quarter.

He said CPI for the full year is forecast to be between 3.2 percent and 3.7 percent.

Official data last month showed Thailand's economy returned to growth in the fourth quarter of 2010, snapping out of a brief recession helped by solid exports and private consumption.

Overall, the country's output expanded by 7.8 percent in 2010, adding to speculation that interest rates might be hiked again.

-- (c) Copyright AFP 2011-03-01