Pridiyathorn: No worries over deflation

Pridiyathorn: No worries over deflation

Deputy Prime Minister MR Pridiyathorn Devakula has brushed aside the possibility that Thailand will have deflation, citing tourism, private investment and government spending as areas on course for growth.

"I've already consulted Bank of Thailand governor Prasarn Trairatvorakul, Arkhom Termpittayapaisith, the secretary-general of the National Economic and Social Development Board (NESDB), and Finance Minister Sommai Phasee, all of whom mutually see Thailand as yet to cross a deflationary boundary," he said.

"The contraction of consumer prices for four months in a row was due mainly to oil prices, which fell to US$50-60 a barrel from $100 in the same period last year."

Falling oil prices led to a slowdown in metals prices, curbing the purchasing power of metal exporters. Prices for rice, rubber and sugar also dipped.

These factors eventually weakened the purchasing power of end-consumers.

The NESDB is scheduled to announce its first-quarter GDP growth figures on May 18.

"Some academics may say Thailand is set to enter a deflationary period, but statistics show the possibility of deflation is unlikely," MR Pridiyathorn said.

"A contraction in inflation does not always simply mean deflation."

Deflation is a condition in which prices for goods and services fall for six months in a row as people spend less, spurring manufacturers to cut prices.

The Commerce Ministry last week said consumer prices based on 450 products and services fell by 1.04% year-on-year in April.

That was steeper than the declines of 0.57% in March and 0.52% in February.

On a month-to-month basis, prices edged up 0.2% last month after a 0.17% increase in March.

For the first four months, consumer prices fell by 0.65% year-on-year.

Government spokesman Yongyuth Mayalarp said the Tourism and Sports Ministry yesterday reported international tourist arrivals rose by 18.3% year-on-year last month to 2.28 million, generating 104 billion baht in revenue, up by 21.9%.

The ministry said the 308,776 tourist arrivals during the May 1-4 period marked a 12.3% increase from the same period last year.

Amonthep Chawla, head of research at CIMB Thai Bank, highlighted the distinction between urban and rural segments.

"Deflation is a risk when looking at overall economic conditions," he said.

"But if you look at the agricultural sector, deflation is already occurring, and an economic recession is happening as well."

Charl Kengchon, managing director of Kasikorn Research Center, said the current conditions could be referred to as disinflation, as overall inflation had declined but not contracted.

Softer core inflation has raised concerns about private consumption and investment but is still not regarded as deflation, he said.

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