Inflation set to increase next year

Inflation set to increase next year

People buy fresh food at the Bang Khong fresh market in Samut Prakan province. Headline inflation rose by 2.71% year-on-year in November according to the Commerce Ministry. (Photo: Somchai Poomlard)
People buy fresh food at the Bang Khong fresh market in Samut Prakan province. Headline inflation rose by 2.71% year-on-year in November according to the Commerce Ministry. (Photo: Somchai Poomlard)

Rising product prices based on higher demand and persistently high oil prices are expected to drive Thailand's headline inflation to grow by 0.7% to 2.4% (an average of 1.5%) next year, from 0.8% to 1.2% this year, according to the Commerce Ministry.

The projection is based on expected economic growth of 3.5-4.5% next year, with Dubai crude oil prices averaging US$63-73 per barrel, and an exchange rate of 31.5-33.5 baht per US dollar.

Ronnarong Phoolpipat, director-general of the Trade Policy and Strategy Office, projected higher headline inflation in 2022 propelled by growth in both domestic and foreign demand, consistent with economic growth, recovering tourism, robust exports, higher production, and a series of economic stimulus measures from the government that would boost people's purchasing power.

In addition, higher demand for energy as the global economy recovers would affect retail petrol prices, which make up a large proportion of the inflation basket, he said.

Mr Ronnarong said pressure from the new Covid-19 variant Omicron might adversely affect the Thai economy, while the prices of energy and agricultural products are still fluctuating.

However, government measures could limit an expansion in inflation and the Commerce Ministry has pledged to monitor the situation, he said.

The ministry reported yesterday headline inflation, gauged by the consumer price index (CPI), rose for a third straight month in November, primarily because of soaring global retail prices of petrol and higher prices of fresh vegetables, which were damaged by flooding.

In addition, the prices of pork, food items and seasonings and condiments also rose.

The ministry reported headline inflation rose by 2.71% year-on-year in November from a 2.38% surge in October, which was the highest rate in seven months, and 1.68% in September. On a monthly basis, CPI rose by 0.28% from October.

Core CPI, which excludes raw food and energy prices, rose 0.29% year-on-year in November and 0.09% from October.

For the first 10 months this year, average headline inflation was 1.15% year-on-year and core inflation 0.21%.

"The CPI for December 2021 is projected to keep rising, in line with the country's economic recovery," said Mr Ronnarong.

"Energy prices remain at a high level and have tended to rise gradually compared with the same period last year, which affects production and logistics costs. For food prices, they are also expected to increase based on consumer demand, production quantities, costs and raw materials. Government stimulus measures aimed at supporting consumers, industries and the overall economy are another factor."

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