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March inflation at 9-month high but within target, Commerce Ministry reports

The Thai Consumer Price Index is on a trend to grow continuously in the first half of the year mainly from rising food and consumer-goods prices fuelled by drought and hot weather, despite lower global fuel prices and lower spending confidence domestically because of political uncertainty.

The Commerce Ministry reported yesterday that March inflation edged up to the highest figure in nine months, to 2.11 per cent year on year, largely on increasing food prices.

"Inflation has been at an appropriate rate, helping stimulate economic growth amid lower spending power. Inflation in the first half of the year is expected to be 2.12 per cent year on year, well under the ministry's annualised projection of 2-2.8 per cent," said Amparwon Pichalai, commercial adviser to the ministry.

Month-on-month inflation in March was 0.22 per cent. For the first quarter, it averaged 2 per cent year on year.

The ministry projects that inflation in the second quarter will average 2.24 per cent.

Amparwon said drought had started to reduce the supply of agricultural products and consequently driven up food prices, particularly fresh vegetables, rice and pork.

The price of fast food is also likely to increase as raw-material costs have risen, she said.

Last month, among the 450 goods and services in the ministry's inflation basket, the prices of 177 items increased, while 70 items decreased in price and 203 were unchanged.

Prices in the food and beverages sector were up by 4.46 per cent on average compared with a year ago, while other prices increased only 0.91 per cent, largely on a slight rise for domestic fuel.

Amparwon said fuel prices in the world market would be on a downward trend in the remaining months of the year, reducing inflationary pressure. In Thailand, however, the hot weather and drought have put upward pressure on food prices as they have started to affect the supply of pork and fresh vegetables. Pork is currently Bt150-Bt155 per kilogram, compared with Bt120-Bt125 a kilo a year ago.

She said inflation was likely to continue in the following months as food prices increase, although prices of many consumer goods would remain unchanged. In the ministry's calculation, cooked food will account for about 6 per cent of the total inflation.

Core inflation in March, which excludes volatile food and fuel prices, firmed up slightly to 1.31 per cent year on year and only 0.08 per cent month on month. Core inflation in the first quarter was 1.19 per cent year on year, well within the Bank of Thailand's target range of 0.5-3 per cent.

Luxmon Attapich, senior country economist at the Asian Development Bank, said drought, a weaker baht, and the rising price of cooking gas could affect the inflation rate this year since these factors would affect food prices. However, she believes the inflation rate will still be at an acceptable level by the end of the year.

"Inflation this year will be higher than last year and we expected it to be at 2.4 per cent by the end of the year," she said.


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