Inflation In Thailand Reaches 7 Year High

[Jai Dee]

In Thailand, inflation reaches 7-year high

Inflation accelerated in Thailand last month to the fastest pace in seven years, the government said Tuesday, increasing pressure on the central bank to raise interest rates again in December.

Consumer prices jumped 6.2 percent in October from a year earlier after gaining 6 percent in September, said Karun Kittisathaporn, the Commerce Ministry's permanent secretary.

It was the largest rise since September 1998. Core prices, which exclude food and energy costs, climbed 2.4 percent. Food, cars, fuel and electricity led the price increases.

Thailand's central bank has tripled its benchmark interest rate in the past year and wants to keep borrowing costs on an "upward path" to damp inflation that is "likely to increase further" because of rising fuel prices, the deputy governor, Bandid Nijathaworn, said on Oct. 19, when the bank increased its key rate by half a percentage point.

"Investors will get used to high inflation and they're factoring it in," said Tom Paiboon, head of equities at Tisco Securities in Bangkok. Inflation is "still going to be high, but it's not shocking anymore. Today we're used to seeing it at 6 percent."

Karun left the official government forecast for inflation unchanged at 4 percent to 4.2 percent for the full year, but said the rate could rise to between 4.4 percent and 4.5 percent.

Tuesday's figure brought the annualized inflation rate for the first 10 months of the year to 4.3 percent.

"Inflation will continue to rise in the last two months of the year to above the October level," Governor Pridiyathorn Devakula of the Bank of Thailand said. "It's not a surprise and it's not dangerous," he said, adding that the rate would start to ease from the first quarter of next year.

The central bank, in its quarterly economic review released Friday, lifted its 2005 inflation forecast by half a percentage point to a range of 4.5 percent to 5 percent and its 2006 projection to between 3.5 percent and 5 percent.

"The final full-year figure will depend on oil, which is likely to rise in the last two months to levels slightly higher than October," Karun said Tuesday.

Suchada Kirakul, senior director at the central bank's economics department, said last week that there was a risk that core inflation could exceed the bank's 3.5 percent ceiling from the second quarter of next year "if we don't do anything."

The price of diesel, used in trucks and buses that account for 70 percent of fuel consumption in Thailand, has risen more than 60 percent this year. The government ended its subsidy on diesel in July after spending 92 billion baht, or $2.3 billion, to cap prices since January 2004.

"The increase in oil prices, by 30 or 40 percent in some months, has affected available revenue and has increased costs," Suchada said on Monday. "People are more careful before buying durable goods."

Source: International Herald Tribune - Bloomberg News

TUESDAY, NOVEMBER 1, 2005

Edited November 2, 2005 by Jai Dee

[Jai Dee]

See also an article in the Bangkok Post on the same subject.

[cclub75]

"Inflation will continue to rise in the last two months of the year to above the October level," Governor Pridiyathorn Devakula of the Bank of Thailand said. "It's not a surprise and it's not dangerous," he said, adding that the rate would start to ease from the first quarter of next year.

<{POST_SNAPBACK}>

"not dangerous" ???? How amazing to hear a Central bank saying that...

Once again, they try to ease the worries. But it's wishfull thinking...

If inflation continue to rise, the BOT will have to increase interest rates... And they know very well the consequences of that...

You have to keep in mind that there is a long delay between a rates hike and it's effect on the economy. It means, the worst is ahead.

[xbusman]

I think that if this is a trend it could bode very ill for the economy. Could be just a blip from oil and housing.

[Ned]

Like a leaking canoe.......Capsizes real fast.

[toastwars]

Thats what you get for following American fiscal systems. Expect a crash

[astral]

Does this make Thailand the Inflation Hub for Asia??

[Noel]

Does this make Thailand the Inflation Hub for Asia??

<{POST_SNAPBACK}>

[crocodilexp]

Laught as much as you want, 6% is NOT a huge inflation by any standards (in the USA it's 4%). I wonder how much of it is due to the oil prices... must be quite a chunk. Also, with everything in Thailand being several times cheaper than the rest of the world, some equalization is to be expected. Enjoy it while you can.

[Firefan]

I have noticed many things go up dramatically over the last year. Sure; it will not affect my life style much that the street noodles went from 20B to 25B or that the bus fare jumped from 5 to 10 Baht, but the poorer Thais are the ones to feel the pinch of such 25%-100% increases much faster.

I have the luxury of choice but people less fortunate have a hard time going below the 5 Baht Ramen noodles (and what happens then when they jump to 10 baht...?). I believe the ramen index (showing sales) is UP these days.

For me it simply means that I try to keep most of my money in other currencies (and abroad) as the 0.75% interest I am currently getting simply means that I am losing money (or more correctly; buying power) every day if left in Thai bank.

Cheers!

[Heng]

There's always salt and rice.

[custard]

Inflation is not worrying. The presence of Thaksin is a cause for concern.

[Heng]

Yeah, bring back the former regimes where corruption produced millionaire generals with much much less benefit to the business community.

[simcity]

Regarding increase price the milk lady came yesterday , my 4 little milk bottle costing me 30 baht before is now 36 baht .

wow 20% in one day !