Inflation may rise again in second half, ministry warns
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Although inflation stabilised last month, the Commerce Ministry fears a resurgence in the second half of the year, given rising fuel prices, fluctuating agricultural output, and uncertainty over the global economy and politics.
The ministry reported that the Consumer Price Index in May grew 2.53 per cent year on year. Month-on-month inflation was at 0.39 per cent, lower than April’s 0.42 per cent.
Inflation for the first five months was 3.03 per cent year on year, below the ministry’s projection of 3.3-3.8 per cent for 2012.
The softening of inflation was due to lower food and fuel prices compared with the same period last year, the ministry’s permanent secretary Yanyong Phuangrach said.
However, he expects higher inflation in the second half driven by higher prices of fuel and crops.
Other risk factors are political concerns, both domestically and in other countries, mainly the Middle East, a major source of fuel. Fragile global economic growth, changes in exchange rates, and the impact of natural disasters on farm production could also be factors, Yanyong said.
The ministry is projecting that annualised inflation in June will be 2.8 per cent, pushing the inflation rate for the first half of the year to about 3 per cent year on year.
It said rising transport costs, particularly in minibus fares, would nudge the inflation rate up by only 0.06 percentage point this year.
The slowing inflation last month was due mainly to an average reduction in fuel prices by 0.71 per cent year on year. The food and beverage price index rose 1.41 per cent, mainly because of higher prices of fresh foods during the dry season.
The index for components, excluding food and beverages, and mainly fuel and electricity costs, edged up only 0.28 per cent in May compared with 1.18 per cent in April.
Last month, core inflation, which excludes volatile food and fuel prices, was measured at 1.95 per cent year on year and 0.29 per cent month on month.
In the first five months, core inflation was 2.46 per cent year on year – well within the Bank of Thailand’s 2012 target range of 0.5-3 per cent, Yanyong said.
