Thailand has fully entered "technical deflation" after consumer prices continued falling in June.
Technical deflation is a condition in which prices of goods and services fall for six months in a row as people spend less, leading manufacturers to cut prices.
But Thanavath Phonvichai, vice-president for research at the University of the Thai Chamber of Commerce, said there was nothing to be scared of as long as the economy remained in a positive range.
Core inflation, which excludes volatile oil and food prices, was flat last month, reflecting weak purchasing power, cautious spending by consumers and a weak economy, he said.
"Based on the latest figures, it's a must for the government to rev up injecting money into the system, tame the baht's strength, cut the interest rate to spur spending and speed up mechanisms to allow businesses to get more access to bank loans," Mr Thanavath said.
Yesterday, the Commerce Ministry reported consumer prices based on 450 products and services contracted by 1.07% year-on-year last month following contractions of 1.27% in May, 1.04% in April, 0.57% in March, 0.52% in February and 0.41% in January. The fall was due mainly to low energy prices.
On a month-on-month basis, headline inflation inched up 0.1% from May.
For the first half, headline inflation fell by 0.81% from a year earlier due largely to a decline in non-food items and beverages, which dropped by 1.82%.
Core inflation increased by 0.94% in June from a year earlier and by 0.06% from the previous month.
Core inflation in the first six months rose by 1.22% year-on-year, still within the central bank's target range of 0.5% to 3%.
Somkiat Triratpan, director of the Commerce Ministry's Office of Trade Policy and Strategy, insisted Thailand had not yet experienced true deflation.
He said low rates were due mainly to low energy prices, weak purchasing power and the government's policy to lower contributions to the state Oil Fund. The ministry still maintains its inflation prediction in a range of 0.6% to 1.3% this year.
Separately, Thailand's household debt climbed to nearly 87% of GDP in the first quarter, reaching 10.6 trillion baht, Bank of Thailand data show.
The figure was an increase from last year's fourth quarter, when it stood at 85.9% of GDP or 10.5 trillion baht.
However, the debt ratio, under the new method for calculating GDP, was recorded at 79.9% of GDP, up from the fourth quarter's 79.3%.
The central bank recently trimmed its GDP forecast for this year to 3% from 3.8%, predicting shipments would shrink by 1.5%. The Finance Ministry's Fiscal Policy Office is also set to cut its growth forecast again this month.