Flavorful finances: Thailand’s July inflation stays mild

The Ministry of Commerce in Thailand revealed that July’s headline inflation saw less acceleration than anticipated, credited largely to a dip in food and energy costs. Meanwhile, forecasts by the agency anticipate the inflation rate’s upturn by less than 1% per month until the year concludes.

July’s year-on-year headline inflation amounted to a 0.38% rise, measured via the consumer price index, according to yesterday’s announcement by the Commerce Ministry. This was higher than the June figure which saw a 0.23% increase.

Significant factors pushing this upward trend were a 1% year-on-year inflation of food and non-alcoholic drink prices elucidated Poonpong Naiyanapakorn, the head of the Trade Policy Strategy Office. Goods noticing an uptick in prices were various fresh vegetables and fruits such as eggplants and limes, eggs, rice and flour products like glutinous rice and vermicelli, non-alcoholic drinks like instant coffee and soft drinks, alongside dairy products such as soymilk and creamer.

These increases were largely due to output disruptions and elevated production costs. Furthermore, prepared food prices also marked a slight hike.

Meanwhile, core inflation, which discounts the fluctuating food and energy prices, saw a 0.86% year-on-year rise in July, indicating a slowdown from the prior month’s 1.32% escalation.

Across the seven months, the average annual headline inflation was calculated at 2.19% whereas core inflation averaged at 1.73%. Poonpong said…

“Given severe drought causing lowered yields, augmented prepared food prices, fuel cost acceleration and geopolitical conflict such as the one in Ukraine, we expect headline inflation in August to see a marginal rise.”

He also added that the high price base anticipated for August would restrain inflation growth. Hence, the key contributors to inflation in Thailand including inconsistent fuel prices, drought, global financial conditions and geopolitical conflicts merit careful observation.

Projecting towards the year-end given these aspects, Poonpong shared that the monthly inflation is sed to stay under the 1% mark. The annual inflation rate aims to lie within the targeted 1-2% or maintain a 1.5% average. This estimation is built on a 2.7%-3.7% GDP growth assumption, Dubai crude oil priced at US$71-81 a barrel, and an exchange rate fluctuation between 33.5-35.5 baht per US dollar.

However, he underlined that if there are alterations in the influencing factors or risks impacting inflation, like oil price changes, drought, the worldwide financial landscape or geopolitical unrest, a reconsideration of the target could occur in September.