Inflation rate poised to slow to 2-3% in 2023

Inflation rate poised to slow to 2-3% in 2023

An egg vendor prepares his wares at Sri Kema Market in Bangkok’s Bang Sue district, following an increase in the price of eggs in August 2022. (Photo: Pornprom Satrabhaya)
An egg vendor prepares his wares at Sri Kema Market in Bangkok’s Bang Sue district, following an increase in the price of eggs in August 2022. (Photo: Pornprom Satrabhaya)

Thailand's inflation rate is expected to slow to 2-3% this year after soaring to a 24-year high last year, driven mainly by rising energy prices.

The Commerce Ministry on Thursday reported headline inflation, gauged by the consumer price index (CPI), rose by 6.08% in 2022 from a year earlier, which was close to the projection (between 5.5%-6.5%, with an average of 6%).

The main contributors were rising energy prices following limited production controlled by oil-producing countries and the Russia-Ukraine war which led to a tight supply of energy and finally high domestic prices of fuel, electricity and liquefied petroleum gas.

High energy prices together with the adjusted minimum wage and interest rate, as well as the baht's depreciation, were hidden costs in all stages of production and led to increasing prices of goods and services.

Furthermore, pig diseases, floods, growing domestic demand, the low-price base of 2021, and rising prices of goods and services were factors behind high inflation in 2022.

The ministry on Thursday also reported the rate rose by 5.89% year-on-year in December from the same month the year before, compared with 5.55% in November, following high prices of energy and food compared with the previous year. Also, contributions were the low-price base of December 2021 and an improvement in domestic demand.

Core inflation, which excludes raw food and energy prices, posted a year-on-year rise of 3.23% in December, compared with 3.22% in November, as production costs were still high.

For the full year of 2022, core inflation was 2.51%.

Poonpong Naiyanapakorn, director-general of the Trade Policy and Strategy Office under the Commerce Ministry, said Thailand's inflation rate in 2022 was relatively low compared with others (latest data in November 2022) including the US, the UK, Italy, Mexico, India and some Asean countries such as Laos, the Philippines and Singapore.

"Inflation this year should significantly decelerate from 2022 as most prices are stable and are starting to drop from their gradual increase following high costs the previous year, while energy prices, especially crude oil, tend to decelerate following lower demand and the global economic situation," said Mr Poonpong.

Additionally, he said the high price base of 2022, the government's measures to lower living costs and price controls would limit the expansion of inflation. However, the adjustment of electricity bills and minimum wages, baht volatility, growing domestic demand and the government's stimulus measures were factors that increased inflation.

Fluctuating commodity prices resulting from geopolitical conflicts, climate change, Covid-19 and animal diseases were also risk factors that should be closely monitored, he said.

The Commerce Ministry expects headline inflation to range between 2-3% in 2023 or an average of 2.5% which is in line with the current economic situation and would be revised if there were any significant changes.

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