Inflation plummets to 21-month low in Thailand as fuel and electricity prices drop

Inflation in Thailand reached its lowest point in 21 months last month, primarily driven by declining fuel prices and electricity bills, along with a higher price base in May of the previous year. Experts predict that the inflation rate will further decrease throughout June.

Wichanun Niwatjinda, deputy director-general of the Trade Policy and Strategy Office, expects inflation for June to either slow down further or contract, mainly due to decreasing energy prices, particularly fuel prices, which have seen a significant drop since May 2022. Furthermore, electricity bills are also on the decline, thanks to government support measures.

Factors such as a high price base in June 2022, government initiatives to reduce living costs, and price controls contribute to the likelihood of easing inflation this month. However, Wichanun also highlighted the need to monitor potential adverse factors, including weather fluctuations, a recovery in demand, and high production costs for items like liquefied petroleum gas, wages, and interest rates. Wichanun said…

“In the first quarter, inflation was 3.88% and it is expected to be slightly above 1% in the second quarter. For the third and fourth quarters, the average is projected to be less than 1% a month. This indicates a likely decrease in inflation throughout the year, with a clearer picture expected in June.”

He also mentioned the possibility of a downward adjustment to the central bank’s inflation target, which will be reconsidered next month. In line with economic conditions and falling energy prices, the Commerce Ministry recently revised its headline inflation outlook for this year from a range of 2-3% to 1.7-2.7%.

The ministry’s data revealed that headline inflation, measured by the consumer price index (CPI), was 0.53% year-on-year in May, marking the fifth consecutive month of deceleration after a 2.67% increase in April.

Wichanun attributed the inflation rate in May to a 3.99% year-on-year rise in food and non-alcoholic beverage prices, with higher prices for certain fruits, vegetables, and eggs due to poor weather and strong demand related to the new school semester. Additionally, prices for non-alcoholic beverages and prepared food items increased because of high costs, reported Bangkok Post.

On the other hand, prices for items such as pork, snakehead fish, vegetable oil, tamarind sauce, shredded/dried coconut, banana, durian, and rose apple witnessed a decline.

Core inflation, which excludes volatile food and energy prices, slowed to 1.55% year-on-year in May, down from 1.66% in April. The CPI fell 0.17% on a monthly basis, primarily due to a 1.59% drop in non-food and beverage prices, as rates for diesel, gasohol, gasoline, and electricity, as well as cleaning supplies, decreased. However, the prices of specific items, such as facial foam, body powder, and soap, increased.

For the five-month average, the CPI rose by 2.96% compared to the same period in 2022.