Oil price slide to further tame inflation

Inflation is seen moderating even more this year to 1.8-2.5 per cent from 1.89 per cent last year thanks to benign oil prices and the restructuring of fuel costs, according to the Commerce Ministry.

At 0.60 per cent year on year, the Consumer Price Index in December rose at its slowest in 62 months since October 2009 on falling oil prices. Compared with November, the CPI was down 0.50 per cent. 

Whole-year inflation of 1.89 per cent was unexpected. The ministry had forecast 2-2.8 per cent for 2014.

“Thailand’s inflation could be lower than expected next year since oil prices are much lower in the world market. The inflation forecast of 1.8-2.5 per cent could be revised down to only 1.5-2 per cent if the oil price continues sliding throughout this new year,” said Somkiat Triratpan, inspector-general of the ministry.

Inflation here has been following the global trend as oil prices are easing around the world. Thailand last year ranked the fourth-lowest in inflation in Asia after Singapore, Taiwan and mainland China.

The ministry’s inflation outlook assumes the Dubai oil price at US$90-$110 per barrel for the whole of 2015. Last month, the food and beverage price index was up 3.16 per cent, while the non-food index headed down 0.74 per cent.

Inflation in the first quarter of this year is projected at 0.11 per cent on expected lower oil prices, electricity bills and crop prices.

However, some goods and services have still been increasing and will pressure inflation in the following years – mainly cooking gas, taxi fares, rent and cooked foods.

According to the ministry’s survey, the price of cooked food has not decreased despite the lower cost of raw materials because businesses have faced slowing sales, so they have to raise prices to cover their costs of production. For instance, a fast-food vendor said he had to raise his prices to Bt40 per dish since consumers had pulled back on purchases, while traders still had to shoulder higher outlays for rent and cooking gas.

Last month, of the ministry’s inflation basket of 450 items, prices increased for 172 components, such as rice, flour, cooking oil, taxi rides, fast food and cooked food, while 181 remained unchanged and 97 decreased from the previous month. Consumers paid less for eggs, shrimp, air tickets and fuel. Core inflation, which excludes volatile fuel and food prices, was 1.59 per cent last year, within the central bank’s target range of 0.5-3 per cent.