Inflation continued to slide in March with the consumer price index (CPI) down 0.57% on the same month in 2014, but the economy is avoiding official "deflation" because consumers are still spending, according to Commerce Ministry.
The index based on 450 products and services stood at 106.33 points in March, a drop of 0.57% year-on-year. The index slid 0.52% in February and contracted 0.41% in January.
Commerce inspector-general Somkiat Triratpan said the average contraction rate for the first three months of 2015 was 0.52%.
However, on a monthly basis prices edged up by 0.17% in March from February.
Mr Somkiat said the fall in March was the resuolt of a 1.53% contraction in the non-food sector while the food sector rose by 1.25%.
He said the index had continued to drop due to the fall in the crude oil price, which in March was 19.49% down on March 2014.
Although the consumer price index has now fallen for three consecutive months, the situation does not warrant the term deflation because core inflation, which omits food and energy, was still on the rise. Core inflation in March rose by 1.31% y-o-y, but was down 0.06% on February.
Mr Somkiat said there are several factors to be taken into consideration when deciding the state of the economy. Deflation theoretically requires the CPI must fall six months in a row.
“If deflation occurred, consumers would not be spending as they would expect prices would continue to drop, so sellers have to lower their prices. That situation has not yet happened. Oil prices are the only factor bringing about an unusual situation,” he said.
The ministry maintain its whole year inflation projection at 0.6% to 1.3%, Mr Somkiat said.