Private consumption 'needs further boost'

The government needs to keep boosting private consumption, which is coming under rising pressure from inflation, the Bank of Thailand said yesterday.

"If the government continues to introduce [stimulus] measures and consumer confidence picks up, private consumption can grow without interruption," said economist Tanawat Ruenbanterng, head of the central bank's team studying the issue. The measures would help cushion the impact of rising costs through the psychological effect, while the soaring cost of living could worsen fragile private consumption.

The rising cost of living has hit households hard, particularly the 40 per cent with the lowest income.

The 20 per cent with the lowest income have to bear additional expenses averaging Bt226 per month - Bt83 is for energy and Bt143 for food.

In the first quarter, political uncertainty, inflation and weak confidence played a crucial role in dampening consumption, particularly for durable goods, which account for 11.2 per cent of private consumption.

Besides the escalating prices of oil and agricultural products, political uncertainty continues to weigh on consumption.

Rises in oil and commodity prices have caused consumers to cut back on spending, especially for durable goods, although surging commodity prices would lift farm income.

The study found non-demand-and-supply factors were key variables pushing up the global oil price. Commodities are the asset class offering impressive returns, which could hedge inflation.