Consumer prices continued falling for a fifth straight month in May, leading the country to face "technical deflation" since June figures are expected to remain negative.
Thanavath Phonvichai, vice-president for research at the University of the Thai Chamber of Commerce, said continued contraction of consumer prices for five months in a row meant Thailand had a 99% chance of entering technical deflation.
Technical deflation is a condition in which the prices of goods and services fall for six months in a row as people spend less, leading manufacturers to cut prices.
Mr Thanavath said core inflation, which excludes volatile oil and food prices, posted a slower increase last month, reflecting weak purchasing power and cautious spending by consumers and a weak economy.
"Based on the latest figures, it's essential for the government to introduce urgent measures to stimulate the economy," he said.
"The central bank may also need to cut its policy rate further to spur purchasing power and boost the economy."
The Commerce Ministry yesterday reported consumer prices based on 450 products and services contracted sharply by 1.27% year-on-year last month, steeper than declines of 1.04% in April, 0.57% in March and 0.52% in February. The rates hit the lowest level in five years and eight months due mainly to low oil prices and the fuel tariff cut.
But on a month-on-month basis, headline inflation inched up 0.17% from the preceding month.
For the first five months of this year, headline inflation fell 0.77% from a year earlier due largely to a decline in non-food items and beverages, which dropped by 1.8% year-on-year.
Meanwhile, core inflation increased 0.94% in May from a year earlier and 0.05% from a month before. In April, core inflation edged up 1.02% year-on-year and 0.11% month-on-month.
Core inflation in the first five months rose by 1.27% year-on-year, still within the central bank's target range of 0.5% to 3% this year.
The Kasikorn Research Center said the continued inflation contraction reflected cautious spending by consumers.
"Household consumption is likely to remain in the doldrums since household incomes have yet to recover fully," the research house said.