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INFLATION

Curb your inflation expectation: BOT says

The Nation

BANGKOK: -- The Bank of Thailand has sent a strong message that inflation is under control despite oil price spikes, amid high inflation expectation which is feared to give birth to a vicious cycle of endless price increases.

On the sideline of Bangkok Bank-sponsored 2012 IIL Asia CEO Summit, Bank of Thailand Governor Prasarn Trairatvorakul yesterday said that the central bank is worried about the currently high inflation expectation, as this could lead to goods prices increases and a vicious cycle which is difficult to end.

"I’m saying here that there’s no need to worry about inflation. The more worries, the more chaos. I can?not speak for the MPC (Monetary Policy Committee - on the policy rate), but what I’m trying to say is it’s in the central bank’s policy announced early this year that the monetary policies would be used to support recovery. There is no plan to hike the policy rate at this moment. On the oil price, even if it hits $140 per barrel, the inflation would be within target ranges, both core and headline inflation ranges," he said.

Under the central bank’s moni?toring, every 10 per cent increase in oil prices would raise the consumer price index by 0.3-0.4 percentage point.

The central bank bases its policies on the assumption that Dubai crude would average $103 per barrel this year. Prasarn said that the assump?tion level could be raised to $110, following the recent spikes on tight demand and supply.

Prasarn yesterday assured all that inflation would not exceed the cen?tral bank's target, despite forecasts that Dubai crude oil would average above US$140 per barrel this year, he added, referring to the central bank's stress test. The central bank targets core inflation at 0.5-3 per cent and headline inflation at 1.5-4.5 per cent.

Against fears that the MPC may raise the policy rate at the March 21 meeting, he said this may not hap?pen as monetary policies this year would be geared towards supporting economic recovery.

Meanwhile, Fiscal Policy Office Director-General Somchai Sajjapongse said yesterday that the unit is revising inflation and pro?posing short and long-term meas?ures to ease impacts on the cost of living. He insisted that the measures would be innovative and would not severely pressure the fiscal position.

At end-March, the FPO will also revise the economic projection upward from 4.5-5.5 per cent, due mainly to public spending which would start entering the economy in March. Somchai is convinced that the economy should expand by over 5 per cent this year.

The Cabinet on Tuesday approved the Bt800 billion borrowing, which would push public debt to 48 per cent of gross domestic product in 2013, near the 60 per cent thresh?old.

The central bank governor is hopeful that the government would try to cut down budget deficits, if there is no another disaster that requires another injection. He noted that if the deficit of 2.4 per cent of GDP is maintained, within 6-7 years, the public debt could breach the threshold. Meanwhile, the revenue base must also be expanded while efficiency of public spending must be the priority. To plug inefficient spending, he also noted that spe?cialised financial institutions’ books must be transparent.

As crude price hovers near $125 per barrel, Deputy Finance Minister Thanusak Lek-uthai said yesterday that the Cabinet would be asked to extend diesel excise tax waiver from end-March to the middle of this year, to help control the cost of living. While the Oil Fund is bearing gas subsidies and operating in the red, the Excise Department cannot re-impose the tax now. The excise tax has been cut by Bt5 per litre since April 21, 2011.

He said that the waiver would be just a short-term measure, to address the government’s concern on cost of living. However, in the medium term, it must be re-imposed and the government may need to devise long-term plans to lower logistics cost.

"The oil prices are on the rise. But if there is no more hurdle and as the government’s stimulus measures should show results in the middle of this year, then, we will need the pub?lic permission to raise the tax," he said.

Prasarn also supported the idea to maintain the subsidies for now and change the energy price structure thereafter, to reduce fiscal burden and distortion in energy consump?tion.

"Lowering subsidies is a right thing to do, as such pose fiscal bur?den and distort energy consumption. Still, the timing is important. Solving one problem could give birth to another. Oil prices are on the rise now due to geopolitical problems in the Middle East. A cut in subsidies could be delayed then, or it might create another problem. As I said before, this should have been avoid?ed from the first place, as it’s hard to be abolished," Prasarn said.

-- The Nation 2012-03-15

[GuestHouse]

He looks good in a suit and tie, standing on the podium with all those banners and microphones - Quite impressive.

Though he lacks a certain credibility that can be found amongst the ordinary looking women, dressed in ordinary clothes, shopping in Thailand's food markets - Not for them the high sciences of economic modelling, they're struggling to make the money in their purse pay for the family food bill - and you don't have to listen too closely to hear they are finding harder to do so day by day.

Meanwhile, the Farang inflation rate (that specific to the goods and services Foreign Residents in Thailand use) continues to rise and rise and rise.

[blazes]

I have noticed that where restaurants catering to farangs have raised their prices (often by 30%), customers have voted with their feet.

[BigJohnnyBKK]

Anytime a government spokesman anywhere comes out and tries to "talk down" fears about something, you know there's a very real problem.

Thais have this fantasy that the government has some sort of magic control over prices, and many times they do try but in the end reality wins and it's always the common people left holding the short end of the stick.

The prices of basic low-end survival commodities have been substantially increasing over the past few years, so for people on minimum wages (which here isn't that far from the average per-capita income) it has become harder and harder to make ends meet.

Wherever possible, wages will have to increase, and hence the spiral. Only solution is long-term - increasing the efficiency of the government (like start actually delivering some value for the taxes spent), increasing the competitiveness of the economy and productivity of the labor force.

Good luck with that Thailand.

[clockman]

when 18-20% of the gdp is misappropriated.!

[12DrinkMore]

when 18-20% of the gdp is misappropriated.!

So how do you feel about the humongous amount of cash spent and being spent on rescuing the western banking fraternity?

It's essentially all the dam_n same, the wealthy extract their bit from the economy and keep the rest poor.

I wouldn't select Thailand as being an exception. On the contrary, the system of paying "tea money" is an arguably fair way of paying the guy that helps you directly, and directly in proportion to the benefit you get.

In the west the buggers screw you through tax in order to bloat up the size of government in the name of Socialism.

I much prefer a bit of private enterprise, where the "rent" extracted falls in relation to how much the person can pay.

Edited March 15, 2012 by 12DrinkMore

[exeter]

I do not recognize the inflation figure of just over 3%. Oil has spiked certainly and although the oil here is coming from Saudi Arabia, the mention of Dubai oil price is not what I had been led to believe, for some reason PTT ties its prices to Brent Crude which is always higher. The fuel we use 91 has gone up from about 32 when I came back in June/11 to 38.75 now. This sort of rise hits everyone and the poor the most.

Restaurants! Our nightly costs have gone up from 235 to 290, the beer has been the same its the food items that have gone up 10-20 bts a dish, not a lot for us, we are not big eaters but again where is the 3% inflation. Same the world over I guess, officials tell you one thing trouble is you dont recognize it in the High Street!

[GuestHouse]

In the west the buggers screw you through tax in order to bloat up the size of government in the name of Socialism.

I much prefer a bit of private enterprise, where the "rent" extracted falls in relation to how much the person can pay.

I'm quite certain you do.

But then I'm also quite certain that you've kept your option open to skip back home west should your life here go to Rat <deleted> or you need medical attention you can't afford, so as you can take comfort and benefit from some of that good old Western Socialism .... all at the expense of other people's taxes of course.

[highchol]

INFLATION

Curb your inflation expectation: BOT says

someone should explain this to the pattaya motorbike taxi cartel, my local fare just jumped from 30 to 40 baht