The consumer price index (CPI), a gauge of headline inflation, is expected to remain in negative territory in the first quarter this year, rebounding to positive from April with availability of a Covid-19 vaccine anticipated.
Pimchanok Vonkorpon, director-general of the Trade Policy and Strategy Office, said the Commerce Ministry expects headline inflation to contract by a maximum of 0.5% in the first quarter, with full-year rates staying in a range of 0.7% to 1.7% (with an average of 1.2%) in 2021.
This year's forecast is based on economic growth in Thailand of 3.5-4.5%, Dubai oil prices averaging US$40-50 per barrel and an exchange rate of 30-32 baht per US dollar.
"This year's headline inflation is expected to improve from demand factors including government stimulus measures to increase purchasing power and higher demand from both domestic and foreign markets, which is beneficial to exports of products and services," said Ms Pimchanok. "Higher demand for energy products will affect domestic energy prices, especially fuel prices, which have a large impact on inflation. Supporting factors on the supply side are prices of raw food, which could expand as agricultural products are affected by climate change, and crude oil, which will have lower production rates from January onwards."
She insisted the new wave of Covid-19 infections in the country is unlikely to affect overall product prices much, with no hoarding of products reported.
However, spending may be affected after the government introduced a set of new restrictions to curb the outbreak, said Ms Pimchanok.
The Trade Policy and Strategy Office reported yesterday CPI dropped by 0.27% year-on-year in December, improving from drops of 0.41% in November, 0.50% in October and 0.7% in September.