Inflationary pressure seen rising in Q4
Given Thailand's rapid economic recovery after last year's floods, experts expect inflationary pressure to grow in the last quarter of this year, which could mean increased risk of a rise in the benchmark rate.
“If there is no [additional] negative news from Europe, [Thailand’s] inflation could become an issue,” said Kobsak Pootrakool, executive vice president at Bangkok Bank.
The Thai economy is expected to improve after the first quarter of this year. “And this is something the BOT [Bank of Thailand] will likely keep a close eye on,” Kobsak said.
Tisco Economic Strategy Unit forecasts economic growth of between 3.5 and 4.5 per cent in the second and third quarters of 2012. Double-digit growth is expected in the fourth quarter.
For the whole of 2012, Tisco Economic Strategy Unit projects 5-per-cent growth, while Kasikorn Research Centre estimates the economy will expand by 4.5-6 per cent.
The BOT last week revised upward its estimate of the country’s economic growth to 6 per cent from the earlier projection of 5.7 per cent, citing a faster-than-expected recovery after the floods and last year’s low base.
“It’s a very low base for growth last year,” said Wiwan Tharahirunchote, executive chairperson for KResearch.
The research house projects headline inflation will average at 3.5 per cent for the whole of 2012.“Headline inflation could be about 3 per cent in the second quarter, accelerate in the third quarter and stay high in another round in the fourth,” said Kampon Adireksombat, senior economist at the research house.
KResearch estimates headline inflation will average at 3.9 per cent for 2012 (figures differ).The central bank estimates headline inflation at 3.5 per cent this year, due to rising oil prices, higher wages and the fast recovery, particularly in consumption and investment.
“Production costs will likely increase, reflecting higher wages and rising energy costs. It might be more difficult to raise prices [of goods and services] right after the floods in the first quarter. “But later, pass-through of costs to prices of goods could be seen when the economy is recovering, and that would bring inflationary pressure,” Kobsak said.
In the short term, the monetary authorities would likely keep the policy rate on hold, however, as there is a risk of the rate rising in the last quarter of 2012 amid increase in prices, he said.
Central bank assistant governor Paiboon Kittisrikangwan signalled last week an effort to continue the rate normalisation process once the Thai economy returns to its normal level, as the real policy rate is still in negative territory.
