Inflation hits sentiment in Thai industry

Inflation hits sentiment in Thai industry

The Thailand Industry Sentiment Index (TISI) fell to a seven-month low of 84.3 points in May amid economic uncertainties ranging from rising inflation to political conflicts overseas, says the Federation of Thai Industries (FTI).

The inflation rate hike and prolonged global oil price surge, driven by the Russia-Ukraine war, come as consumer purchasing power remains weak.

These factors have dampened confidence in the business sector, said Kriengkrai Thiennukul, chairman of the FTI.

"As the war continues, China's lockdown measures remain a worry and a new geopolitical conflict between Iran and Israel erupts, the world is surrounded by uncertainties while it has yet to fully recover from the impact of Covid-19," he said.

The FTI is closely monitoring the possible impact on Thai exports if the global economy slows down, as some large companies plan to suspend new hiring and cut their investment budgets.

In Thailand, soaring inflation has become more serious and is believed to be a factor leading to increases in the minimum wage.

The FTI agrees with a need to increase the Bank of Thailand's policy rate to help curb inflation, but when the rise is applied will depend on the central bank's Monetary Policy Committee (MPC).

"We expect the third or fourth quarters to be the right time to increase the interest rate by 0.25 percentage points to calm down inflation," said Mr Kriengkrai.

The MPC met on Wednesday and voted 4-3 to maintain the policy rate at its existing level of 0.5%. However, the central bank signalled it might raise the policy rate in the future because of a faster-than-expected Thai economic recovery.

The global oil price surge is blamed for causing a rapid rise in Thai inflation. The Trade Policy and Strategy Office reported headline inflation in May hit a 13-year high of 7.1%.

The higher price of energy was the top concern listed by 1,323 enterprises across 45 industry clubs under the FTI during the latest survey to calculate the May TISI.

The issue received 85.5% of votes, followed by worries over the global economy (65.7%) and concerns about the domestic economy (59%).



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