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Slow inflation ‘shows economy is recovering’

The Commerce Ministry has reported that inflation rose 3.35 per cent in February due to rising food and oil prices. But the rate is down 3.8 per cent from the previous month, showing that the country’s economy is sound, says the ministry.

Thursday 15 March 2012, 12:10PM


Permanent Secretary of Commerce, Yanyong Puangrat, has announced that the consumer price index for February was 113.63, an increase of 3.35 per cent from the same period last year.


This takes the average inflation rise for January and February to 3.36 per cent compared with the same period last year.


The increase can be attributed to rising goods prices: food and beverage prices rose by 7.18 per cent, rice and starch by 2.78 per cent, 7.19 per cent for meat and poultry, 2.69 per cent for eggs and dairy products, and 6.43 per cent
for fruits and vegetables.


It is predicted that the inflation rate for the first quarter will be 3.65 to 3.75 per cent, and between 3.3 and 3.8 per cent for the whole year – under the assumption that the global oil price is US$95 to US$115 (B2,850-B3,450) per barrel, and the exchange rate is B29.33 to the US dollar.


The Permanent Secretary added that the Government’s decision to reinstate the fuel levy has had minimal impact on the inflation rate at just 0.112 per cent. At the same time, the LPG price hike only affected inflation by 0.0018 per cent, while the NGV price hike has had no impact at all.


The planned change in daily minimum wage to B300 and the B15,000 minimum monthly salary for bachelor-degree holders also has had no effect on inflation.

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Global economic uncertainties, natural disasters, fluctuating exchange rates, and unclear interest rate policies remain the main external factors affecting inflation.


The Kasikorn Research Center expects inflation in the first half of 2012 to remain at the current level but said it could surpass four per cent in the latter half of the year due to rising production and logistics costs in light of more expensive oil.


It noted that the impact on the prices of basic commodities, from rising manufacturing and logistics costs and increased Oil Fund contributions from petrol sales, was significant in the month.


It estimated that inflation during the first half of the year will stand at around 3.3 to 3.4 per cent, with a chance of exceeding 4 per cent due to pressure from rising production costs.


Headline inflation is projected to average at 3.9 per cent this year, which is within the target range of 3.5 to 4.5 per cent, while core inflation could rise from the previous year to three per cent, also within the target range of 2.6 to 3.6 per cent.


The centre, meanwhile, suggested investors keep an eye on the movement of the core inflation rate, which is likely to inch toward the upper end of the current target range of 0.5 to 3 per cent during the second half of the year.

 

 

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