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Published on March 11, 2008

Thailand's inflation could reach 4-4.5 per cent this year on the back of skyrocketing oil prices, despite Commerce Ministry efforts to bring down prices of consumer products, an economist said yesterday.

Thanawat Polvichai, director of the University of the Thai Chamber of Commerce's Economic and Business Forecasting Centre, said the average oil price this year was likely to surpass the ministry's assumed average of US$80 (Bt2,500) per barrel. As a result, inflation could also exceed the ministry's target of 3-3.5 per cent.

"Higher-than-expected oil prices will drive inflation above 4 per cent. Moreover, the government's plan to stimulate economic growth will also drive high inflation in the second half of the year," he said, adding that temporary price cuts would delay inflation hikes for only a few months.

Consumer prices in the first two months rose 4.8 per cent.

The Commerce Ministry yesterday succeeded in convincing 12 manufacturers to reduce the prices of 60 consumer products, including soap, shampoo and powdered milk, in a bid to bring down the cost of living. Retail prices of the products will be cut 5-30 per cent for two to six months.

The products are manufactured by the Saha Group, Lion, Unilever Thai Trading, Colgate-Palmolive, Kao Commercial, Osotspa, Johnson & Johnson, Nestle, Dumex, PZ Cusssons and Procter & Gamble.

Thai Soap, Detergent and Personnel Care Manufacturers' Association president Prapot Nanthawatsiri said the producers had agreed to reduce their prices for only a short term, because some were still facing losses from rising costs of production.

"We agreed to help reduce the public burden, but we may have to raise our prices in the second half of the year," he said.

Prapot said the government should focus more on controlling food prices and transportation fares and raising long-term consumer income. The Saha Group has suffered losses from its detergent business for five years, because of higher costs for raw materials, which are petroleum by-products, he said.

Commerce Minister Mingkwan Sangsuwan said the ministry's requests for help from manufacturers to decrease prices were an effective short-term measure to help consumers. The ministry will seek other measures to curb the burden on consumers and consider increased prices for manufacturers facing higher costs.

Amid complaints that higher raw-material prices had forced local producers to raise their prices, Deputy Finance Minister Pradit Pataraprasit yesterday said the ministry was ready to cut import tariffs for raw materials supplying the animal-feed industry. The tariffs cover imports of soybeans, maize and soybean meal, and at present they are subject to a quota system designed to protect local farmers.

The proposal will be considered by the Cabinet next week, following a meeting of representatives from the Finance, Agriculture and Commerce ministries.

"We'll take interested groups into account," Pradit said.

Pradit met with Customs Department director-general Wisudhi Srisuphan yesterday to discuss facilitation of shipments. Over the past five months, the department's tax collections have surpassed its target by Bt3.6 billion. Last Friday, the department seized counterfeit brand-name products worth Bt149 million, including Louis Vuitton, Prada, Chanel and Hello Kitty.

Wichit Chaitrong

The Nation