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Inflation target for 2014 set at 2-2.8% but could

Inflation could surge to more than 3-3.8 per cent this year if the currently frozen pump price for diesel fuel is floated this month, the Commerce Ministry warns. However, the ministry is going with an official projection considerably lower than that.

It yesterday reported that the Consumer Price Index in 2013 was up 2.18 per cent, at the low end of the projected 2.1-2.6 per cent. Inflation in December was slight at 1.67 per cent year on year, and 0.14 per cent month on month.

The ministry also announced its official 2014 inflation target of 2-2.8 per cent. This is based on assumptions of the government continuing its subsidies on diesel, on train and bus fares, and on school fees, and a Dubai oil price of US$95-$115 per barrel. The exchange rate is projected at Bt29-Bt34 per US dollar, and growth in gross domestic product of 3-5 per cent.

"Without the price subsidies, in particular for diesel fuel, inflation this year could be 1 percentage point higher, as diesel is a major cost of manufacturing and transport," said Srirat Rastapana, permanent secretary to the Commerce Ministry.

She added that if the subsidy for third-class train fares is dropped, it would add 0.18 percentage point to the inflation rate, while cancelling subsidised bus fares would add 0.11 point. An increase of the price of liquefied petroleum gas by Bt6 could add another 0.1 percentage point, while higher electricity bills could tack on a further 0.068 point.

Srirat said Thailand's inflation was stable and in line with other economies in East Asia. For instance, in the first 11 months of 2013, Singapore's inflation rate was 2.4 per cent year on year, Malaysia's 2 per cent, mainland China's 2.69 per cent, and the Philippines' 2.8 per cent. Others saw higher rates, with Hong Kong at 4.33 per cent, India 6.07 per cent, Laos 6.27 per cent, and Vietnam 6.65 per cent.

The Kingdom's inflation last month was largely due to an increase in fuel prices by 1.51 per cent, while most consumer goods were unchanged.

The ministry also reported that core inflation in 2013 was 1 per cent, well within the Bank of Thailand's projection of 0.5-3 per cent. Last month, the core inflation rate was 0.91 per cent year on year, and 0.1 per cent compared with November.

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