Economic outlook Pridiyathorn warns of more high inflation

Although Thailand has not yet slipped into recession, former deputy prime minister and finance minister MR Pridiyathorn Devakula yesterday warned of a sec¬ond round of high inflation, due to the costpush effect of rising prices for con¬sumer goods.

Speaking at the Commerce Ministry on the topic of "Thailand's Economic Crisis: How to Handle It", Pridiyathorn said the economy should no longer rely chiefly on exports, but also on domestic consumption.

He said the rising price for agricultural goods would be a key economic driving force as it would increase domestic consumption. "Exports account for 70 per cent of gross domestic product. We should change our economic struc¬ture to rely more on domestic con¬sumption, as other trading countries are facing economic recessions," said Pridiyathorn.

Among important trading partners confronting recession is the United States with its subprime mortgage problem, while the European Union's economy dropped almost 1 per cent in the second quarter and Japan's econ¬omy slumped by 2.5 per cent in the same period.

Exports are likely to show slower growth in the current quarter, due to reduced economic growth in partner countries, he added.

Pridiyathorn pointed out that Thailand's inflation would still be high and range between 7 and 9 per cent in the second half of the year, as a result of rising prices for consumer goods and increased oil prices. He said oil prices should not, however, increase as in the first half, and should range between US$110 (Bt3,800) and $120 a barrel in the second six months.

He said the economy should still grow steadily in the next few years thanks to the increas¬ing prices of five major agricultural products: sugar cane, tapioca, oil palm, rubber and rice. The farm sector's income increased by 59 per cent in July com¬pared with the same period last year. The price of sugar cane was up by 30 per cent, palm by 30 to 40 per cent, rubber by 60 per cent, tapioca by 70 to 80 per cent, and rice by more than 100 per cent in the first half of the year.

"Every country will face a second round of high inflation, including Thailand. However, we are in a stronger position as rising agricultur¬al product prices maintain economic growth because a major part of the population has benefited from higher these prices," said Pridiyathorn.