Consumer prices hit a 64-month-low last month due to declining oil and food prices, but authorities still insist Thailand has yet to see signs of deflation.
Thailand's consumer price index fell for the first time in more than five years last month, driven by low prices for retail oil, electricity and meat. WICHAN CHAROENKIARTPAKUN
Economists also forecast negative inflation will be seen through the first half of this year but have ruled out deflation.
"The fall is completely due to effects from the decline in oil prices," said Somkiat Triratpan, an inspector-general in the Commerce Ministry.
"But the situation has yet to show a sign of deflation [in which prices of goods and services have fallen for six months in a row], as the fall stems largely from lower production costs in line with falling oil prices, not from a lack of production and consumption."
The ministry yesterday reported January's headline inflation, based on 450 products and services, shrank by 0.41% year-on-year.
It was the first contraction in more than five years, since September 2009, and due to a fall of 1.86% in non-food prices, particularly transport and communications.
However, food and beverage prices still managed to edge up 2.34% year-on-year, driven mainly by meat, poultry and fish, seasonings and condiments, non-alcoholic beverages and prepared foods.
Consumer prices also dropped 0.59% month-on-month in January thanks to lower prices in both the food and non-food sectors, which fell by 0.14% and 0.83%, respectively.
Mr Somkiat attributed the fall mainly to declining prices of oil, electricity and fresh foods such as pork, chicken, fruit and certain vegetables in line with the government's measures to take care of people's cost of living and product prices.
Bank of Thailand spokesman Chirathep Senivongs Na Ayudhya said the latest inflation figure was in line with the central bank's earlier assessment and caused largely by lower oil prices resulting from declining crude oil prices.
"We're likely to see negative year-on-year inflation in the first half due to falling oil prices," said Charl Kengchon, managing director of Kasikorn Research Center.
The think tank's 1.5% projection made last December for headline inflation in 2015 is likely to be cut due to lower-than-expected oil prices, he said.
Deflation is, however, not occurring, as food inflation remains in positive territory, Mr Charl said.
He admitted the Bank of Thailand was likely to stand pat on its policy rate to cushion against capital flows and foreign exchange volatility.
However, there is an increasing chance the Monetary Policy Committee will cut the rate by 25 basis points next month, given the greater downside risks to the central bank's 4% economic growth forecast, Mr Charl said.
