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Price controls planned

Fear of 'stagflation' with consumption and investment slowing here and abroad

Price controls are the focus of new government measures drawn up in light of slowing global growth, which has led to a decline in domestic consumption and investment.

After the workshop yesterday chaired by Premier Yingluck Shinawatra and economic

ministers, the government announced six measures which deal mostly with the

price of fresh and finished products.

Deputy Premier and Commerce Minister Niwatthumrong Boonsong-paisarn said that another workshop would be held next week to devise more moves, as the government fears stagflation - slow economic growth and a rise in prices.

The PM wanted a long-term solution to address product prices from "upstream to

downstream", he said. These moves would strike a balance for sellers and buyers, at a time when consumers are tightening their belts as global economy slows.

Initial measures approved yesterday were:

1. Agriculture Ministry assigned to find ways to lower the cost of fertiliser and feed meal;

2. Commerce and Agriculture ministries to consider setting up regional distribution centres;

3. Agriculture Ministry to come up with efficient zoning strategies;

4. Ministries of Commerce, Finance and Agriculture to promote competition;

5. Energy Ministry to restructure energy prices for higher energy efficiency;

6. Finance Ministry, Bank of Thailand and the National Economic and Social Development Board to closely monitor domestic consumption and investment.

The Treasury Department was also assigned to provide space for distribution of "price-controlled" products.

A government source said that according to the NESDB report, inflation in the first half of this year stood at 2.7 per cent - the lowest in three years, but some products saw a rise in price. From Sept 2011, the fresh vegetable price index has risen by 26 per cent; fresh fruit prices by 16 per cent, finished food products by 5 per cent, electricity by 20 per cent, tap water by 12 per cent, and fuel by nearly 15 per cent.

The NESDB said there was no sign of a spike in inflation in the latter half, thanks mainly to stable oil prices as well as strict control on product price hikes. Economic growth in the second quarter may be lower than the first, because of a contraction

in private consumption (0.2 per cent in May) and investment (3.3 per cent in the same month). Delays in public investment could also affect the full-year growth forecast at 4.2-5.2 per cent, as this assumes disbursement of at least Bt67 billion of the Bt350-billion water-management budget and at least Bt10 billion from the Bt2 trillion infrastructure scheme.

While the water-management scheme awaits the completion of environmental and health impact assessments, only Bt6 billion is expected to be disbursed under the infrastructure scheme.

Several economic houses have downgraded growth projections for Thailand this year. On July 19, the Bank of Thailand is expected to revise its projection from 5.1 per cent, as the International Monetary Fund this week lowered its global growth forecast by 0.2 percentage points to 3.1 per cent, factoring in lower growth in emerging markets, particularly China.

While the IMF's new forecast for China was cut by 0.3 percentage points to 7.8 per cent against China's official target of 7.5 per cent, Chinese Finance Minister Lou Jiwei yesterday signalled the world's second-biggest economy may expand less than that and that growth as low as 6.5 per cent may be tolerable in the future.

At the US-China Strategic and Economic Dialogue in Washington, Lou said he was confident of achieving a 7 per cent rate this year. His comments suggest China is prepared to allow a further slowdown from a rate that's already at risk of falling to a 23-year low this year as Premier Li Keqiang focuses on policy changes to create more-sustainable expansion.

Yingluck, early yesterday, also attended a meeting of the international business committee. The Foreign Affairs Ministry was tasked to ensure Thailand ratifies the last three of nine Asean cross-border treaties signs before 2014, to promote Thai exports.

The committee was also asked to boost competitiveness, and to discuss this with the private sector. Commercial counsellors will also monitor trade barriers.


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