Ministry keeps inflation average at 1.5%

Ministry keeps inflation average at 1.5%

Production, logistics costs set to increase

A vendor waits for a customer to select vegetables at Pak Kret market in Pak Kret district in Nonthaburi on April 24, 2021. (Photo by Nutthawat Wicheanbut)
A vendor waits for a customer to select vegetables at Pak Kret market in Pak Kret district in Nonthaburi on April 24, 2021. (Photo by Nutthawat Wicheanbut)

Despite a sharp rise in the prices of fresh food such as vegetables, pork, eggs, cooking oil, rice and curry, the Commerce Ministry is maintaining its headline inflation forecast in the range of 0.7% to 2.4% (average of 1.5%) this year.

Ronnarong Phoolpipat, director-general of the Trade Policy and Strategy Office, said headline inflation is projected to increase in 2022 in line with supply and demand because of the country's economic recovery.

Domestic and international demand will be supported by tourism, exports and production, said Mr Ronnarong.

Higher demand for energy is another significant factor, while government stimulus packages are expected to help increase the purchasing power of businesses and individuals, he said.

"For the supply side, an increase in production and logistics costs is expected, along with depreciation of the baht and labour shortages. These factors will affect the manufacturing sector and prices of goods," said Mr Ronnarong.

"However, ongoing pressure from the Covid-19 situation is a risk factor that may adversely affect the economy, limiting the expansion of inflation."

He said the headline inflation projection by his office is based on expected economic growth of 3.5-4.5% this 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.

The ministry reported yesterday headline inflation, gauged by the consumer price index (CPI), rose for a fourth straight month in December, primarily driven by a sharp increase in prices of fresh food such as fresh vegetables, pork and eggs as a result of rising livestock production costs, especially for swine disease prevention.

In addition, the prices of cooking oil, rice and curry increased as a result of the rise in production costs and ingredients.

The ministry reported headline inflation was 2.17% year-on-year in December, decelerating from 2.71% growth in November and a 2.38% surge in October.

On a monthly basis, CPI dropped by 0.38% from November.

Core CPI, which excludes raw food and energy prices, rose 0.29% year-on-year in December, unchanged from the previous month.

For the 12-month average, the rate increased 1.23% from 2020, which is close to the target range projected by the ministry of 0.8% to 1.2%.

Excluding volatile food and energy prices, the average core CPI rose 0.23% from a year earlier.

"The first factor that contributed to the rise in inflation in 2021 was gasoline, as supply was insufficient in meeting demand, leading to higher prices globally for fuels and related products," said Mr Ronnarong.

"The second contribution was from fresh vegetables as farms were submerged part of the year by floods. Seasonings and condiments, as well as food items at home and away from home, were also significant factors because of a rise in production costs.

"On the other hand, these were partially offset by downward contributions from rice, glutinous rice and fresh fruit because of a drop in both domestic and international demand during the pandemic. Production also increased for these crops compared with last year. Several government measures also resulted in the reduction in utility costs and tuition fees."

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