Headline inflation declined for a fourth consecutive month in January, reaching its lowest level in 35 months, as the Commerce Ministry expects the trend to continue in February and March thanks to government measures to reduce the cost of living.
Despite the outlook, Poonpong Naiyanapakorn, director-general of the Trade Policy and Strategy Office, insisted there is no indication of deflation.
Deflation is when the prices of goods and services fall over a period of time as people spend less and delay purchases in anticipation of lower prices, leading manufacturers to cut prices and earn less. This leads to an economic slowdown, investors delay their investment and ultimately the money supply in the system declines.
"The issue of deflation has been brought up the past 2-3 months. We must examine whether the prices of most goods have actually decreased," said Mr Poonpong.
"In addition, it is necessary to look at inflation itself -- whether it is inherent or influenced by external intervention, especially policies to reduce the cost of living. In a nutshell, there is no deflation so far and there's no need to worry."
The ministry reported on Monday headline inflation, gauged by the consumer price index, declined by 1.11% year-on-year in January following a 0.83% dip in December, a 0.44% contraction in November and a 0.31% decline in October. Inflation gained 0.3% in September.
The decline in January was largely attributed to a drop in the prices of energy because of government measures.
The prices of fresh food, especially fresh vegetables and meat, decreased since last month. This was caused by greater market supply and relatively high baseline prices in January 2023, contributing to a dip in the inflation rate, he said.
As for other goods and services, prices moved in a normal direction, said Mr Poonpong.
Core inflation, which excludes volatile food and energy prices, rose by 0.52% year-on-year in January.
Last year, inflation for the whole year gained 1.23% from 2022, within the target range set by the ministry, with core inflation at 1.27%.
He said for the first quarter, the inflation rate is likely to contract by 0.7% year-on-year, with the rate expected to fluctuate in the following months.
There are still factors contributing to an expanding inflation rate including geopolitical tensions in the Middle East, resulting in higher freight charges and prices of essential consumer goods, said Mr Poonpong.
He said supporting factors are the baht's tendency to depreciate, leading to higher import prices, increased prices of agricultural products as demand rises, and the expansion of the tourism sector following the government's policies to facilitate travel to Thailand for tourists and foreign executives.
The Commerce Ministry predicts the inflation rate for 2024 in a range from -0.3% to 1.7%.