Pressure on prices will continue

"High inflation will hurt the entire economy, but we cannot control external factors such as oil prices," Commerce Ministry permanent secretary Siripol Yodmuangcharoen said yesterday.

Inflation in April, which was the highest in 23 months, raised the four-month average to 5.3 per cent year on year. It is moving near 8.1 per cent, last seen in 1998. Thailand's inflation peaked at 20 per cent in 1973 during the world oil shock.

Industry Ministry permanent secretary Chakramon Phasukavanich said oil prices were pushing up costs worldwide and inflation in some countries facing food shortages surged more than 10 per cent.

"Business operators are carrying higher production and logistics costs and they may need to raise wages. The easiest solution is to increase product prices, cut production costs or reduce product quality," he said.

On May 16, Transport Ministry committees will decide whether to approve increases in bus and ferry fares as global crude oil prices are over US$100 (Bt3,160) a barrel.

The US rate cut on Wednesday also drove investors to buy commodities as a hedge against inflation when the US dollar falls. This kept light sweet crude for June delivery at $114 a barrel in Singapore trading yesterday.

Oil prices carry 9.9-per-cent weight in Thailand's inflation calculations. They are driving operating costs up and forcing operators to raise product prices. With the Bt5.35-per-kilogram increase in retail sugar prices, soft drinks and condensed milk could cost more. Labourers have also asked for a Bt5-Bt9 increase in minimum wages.

Siripol said the government would do its best to control inflation. To ease consumers'  burden the Commerce Ministry will sell rice and pork at special prices. It will maintain stringent rules on 60 items on the price control list, particularly milk.

A few days before the April figures were released, the Commerce Ministry raised its inflation forecast from 3-3.5 per cent to 5-5.5 per cent. The new projection was based on an average Dubai oil price of $100-105 per barrel, up from $85 per barrel; the exchange rate strengthening to Bt31-32 against the dollar from Bt33-33.5; and a policy rate of 3.25 per cent.