Thailand’s August inflation hits 14-year high on the back of high energy cost, BoT expects gradual economic recovery

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Thailand’s headline inflation hits 14-year high in August when it rose by as much as 7.86% year-on-year, the Ministry of Commerce announced.

“Inflation has reached its peak this year…and the main driver of inflation is still energy prices which increased by 30.5%,” said Ronarong Phoolpipat, director-general of the ministry’s Trade Policy and Strategy Office.

“Even though the prices of gasoline and gasohol have decreased when compared to a month earlier, the price of diesel, cooking gas and electricity have all gone up while the prices of services such as public transportation and education have also increased,” he said.

The headline consumer price index (CPI) was at 107.46 points in August, up 7.86% year-on-year and increased by 0.05% when compared to July.

The CPI was at 4.7%, 7.1%, 7.66% and 7.61% in April, May, June and July, respectively.

The inflation rate in August was the highest since the index rose by 9.2% year-on-year in July 2008, the same year as the previous global financial crisis.

The Commerce Ministry’s headline inflation forecast for 2022 is currently at the range of 5.5-6.5%.

The Bank of Thailand (BoT) expects headline inflation to peak in Q3 of 2022 before ending the year at no less than 6%.

For the first 8-months of 2022, headline inflation rose by 6.14% year-on-year.

Core inflation rose by 3.15% year-on-year and up by 0.09% when compared to the previous month and representing a fifth consecutive month of increase.

For the first 8 months of 2022, core inflation rose by 2.16% year-on-year.

The central bank had in August increased the country’s benchmark lending rate from a record low of 0.5% to 0.75% to stop headline inflation from going up any further. BoT’s Monetary Policy Committee has 2 more meetings this year including September and November.

Its governor, Sethaput Suthiwart-Narueput, said last month that Thailand’s inflation is “almost exclusively” being driven by supply-side factors, but the bank was still concerned that core inflation has also been trending up.

Sethaput also said at a seminar on Monday that he expects the Thai economy to continue to “gradually” recover and the country’s gross domestic product (GDP) should be able to expand by 3-4% in 2022.

The recovery is being driven by strong domestic demand and the recovery of the tourism sector where Thailand is expected to welcome at least 8 million foreign tourists this year, he said.

However, there are still concerns over the global economy from risks such as the slowdown of the US economy from rising interest rates and the slow economic recovery in China which could affect Thailand’s exports.

For inflation, Sethaput maintained his previous predictions that it will peak in the 3rd quarter of 2022 and stay somewhere north of 6% by the end of the year.

For the policy interest rate, the central bank governor said the normalization of interest rates is needed but the hikes will be done “gradually” and the important thing here is to maintain the economic recovery.

“Strong and rapid hikes are not suitable for Thailand, and it could be bad for us because of the high household debt level,” he said.

Governor of the Bank of Thailand Sethaput Suthiwartnarueput

Thailand’s household debts reached 14.6 trillion baht in the 1st quarter of this year, representing 89.2% of GDP.


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