Thailand’s inflation hits 33-month low sparking economic slowdown concerns

Inflation in Thailand experienced a downward trend for the second month in a row, marking a 33-month low in November. This decrease sparked concerns regarding the increased risk of economic deceleration and potential deflation. The Commerce Ministry of Thailand has also predicted a further decline in the inflation rate in December.

Deflation is defined as a period where the prices of goods and services decrease over time. This typically leads to a reduction in consumer spending as people anticipate further decreases in prices. As a result, manufacturers are forced to reduce prices, leading to lower profits and a subsequent economic slowdown.

Deflation is characterised by three key indicators: a negative inflation rate, a continuous contraction in the inflation rate for at least one quarter, and a negative movement in economic indicators such as GDP, private consumption, investment, unemployment rates, and exports of goods and services.

In recent months, Thailand’s headline inflation, measured by the consumer price index, dipped below zero for two consecutive months, -0.31% year-on-year in October, and -0.44% in November. This decrease was primarily due to government measures to reduce prices for certain types of fuel and electricity bills, which make up about 13.7% of the inflation calculation.

Despite these developments, Poonpong Naiyanapakorn, director-general of the Trade Policy and Strategy Office, insists that the economy remains on a steady growth path. He pointed out that the Thai GDP in the third quarter expanded by 1.5% year-on-year, continuing a positive trend since the fourth quarter of 2021. Additionally, private consumption in the third quarter grew by 8.1% year-on-year, while the unemployment rate was 0.99%, the lowest in 15 quarters.

However, Nattaporn Triratanasirikul, deputy managing director of Kasikorn Research Center, argues that the decrease in inflation for two consecutive months should not lead to concerns about deflation. Instead, she attributed the decrease to government subsidies, mainly for electricity prices. She also stated that the current rate of inflation is appropriate based on Thai GDP growth and does not require the Bank of Thailand to urgently cut interest rates to stimulate growth.

Thailand Economy

Despite differing opinions on the current state of Thailand’s economy, all agree that the trend for inflation in the next year is continued deceleration. This is due to the government’s ongoing efforts to ease the cost of living, particularly for retail prices of fuel and electricity.

However, several risk factors could affect inflation rates, including potential geopolitical conflicts and fluctuations in the baht based on Thailand’s monetary policy and the implementation of support measures, reported Bangkok Post.