The Commerce Ministry has lowered its annual inflation forecast to a range of 0.7-1.3% this year from 0.7-1.7% because of lower energy prices, a stronger baht and dim export prospects.
According to Pimchanok Vonkorpon, director-general of the Trade Policy and Strategy Office under the Commerce Ministry, the new forecast was made on the assumption that GDP would grow in a range of 3.3-3.8% this year, with crude oil prices of US$60-70 a barrel and an exchange rate of 31-32 baht to the US dollar.
The agency expects headline inflation to stay at 1% in the third quarter and 1.2% in the fourth quarter.
"Due to unfavourable developments in the external sector such as lower oil prices, as well as the high value of the baht and the export slowdown, we expect pressure from the hike of goods and service prices to become less this year," Ms Pimchanok said.
The Commerce Ministry reported yesterday that the consumer price index (CPI), which gauges headline inflation, rose by 0.87% year-on-year in June, decelerating from 1.15% in May, 1.23% in April and 1.24% in March. The uptick was 0.73% in February and 0.27% in January.
The easing pace was attributed to lower prices in the non-food sector, led by energy prices, which fell by 6.26% from June of last year; communications (mobile phones), down 0.03%; and apparel and footwear, down 0.18%.
According to the Commerce Ministry's report, the prices of fresh fruits and vegetables such as chillies, limes and cabbages continued to rise, with prices up 18.89% from the same month last year because of alternating dry weather and rainfall, which made crops rot easily.
Meat, poultry and fish prices were up 4.41% from the same month last year, while those of milled rice and flour increased 4.02%.
On a month-to-month basis, overall prices rose 0.36% in June after rising 0.48% in May, boosted by fresh fruits and vegetables.
Core CPI, which excludes volatile food and energy prices, rose 0.48% year-on-year in June and 0.05% from May.
For the first half of the year, headline inflation averaged 0.92%. Core inflation stood at 0.58%.
Ms Pimchanok said consumer prices are expected to increase in the second half of the year, driven by anticipated higher energy prices.
"Despite the decelerating increase in June's headline inflation, we insist that Thailand remains far from a recession," she said, citing construction prices that remain relatively high and crop prices and wages that are in a rising trend.
Thanavath Phonvichai, vice-president for research at the University of the Thai Chamber of Commerce, said a relatively lower core inflation rate and easing headline inflation were precise indicators of Thailand's continuous economic slowdown.
"Overall purchasing demand remains poor," he said. "This will be a key reason for the central bank to lower its policy interest rate."
Mr Thanavath urged the new government to come up with stimulus packages to revive the economy.