Thai inflation to remain relatively low in Q3: TCC
The Thai Chamber of Commerce (TCC) expects domestic inflation to remain relatively low in the third quarter following the 2.49% inflation in the first half of this year, while the Commerce Ministry estimates this year's domestic inflation at 1-2% with a median figure of 1.5%.
According to Wisit Limluecha, vice chairman of the Thai Chamber of Commerce (TCC) and chairman of the Processed Food and Future Food Committee (PFC) of the Federation of Thai Industries (FTI), the food industry is facing risks and challenges, such as economic stagnation, inflation, rising oil prices, and the effects of the El Nino phenomenon.
The outlook for Thai inflation in the third quarter of 2023 is expected to remain relatively low, although food prices are trending higher due to the El Nino-induced drought, especially for vegetables, fruits, eggs, and milk. The Commerce Ministry forecasts general inflation to be at 1-2% to align with the economic situation in the second half of the year. However, the three private-sector institutions (TCC, FTI and others) are maintaining their inflation forecasts for this year at 2.2-2.7%.
When a comparison was made between the domestic inflation rate and that of other countries in May, Thailand was among the countries with the lowest inflation in Asean, standing at 3.37%. However, the situation is subject to global conflicts, global economic slowdown trends, and various state measures, including more severe droughts than expected.
Globally, high inflation levels are weakening the purchasing power of households, forcing consumers to spend more money to buy products and reduce non-essential purchases. People with insufficient income to keep up with rising prices are forced to reduce their consumption, directly affecting overall business operations, especially in the food industry and other industries. This has a knock-on effect on Thailand where the food industry is already under pressure from inflation.
Thai consumers meanwhile, particularly in the low and low to middle-income groups, will see weaker purchasing power as inflation increases and this will affect the domestic food market, impacting the food industry, especially for non-essential food products.
From the production side, the negative impact comes from the increasing interest rates, which will affect all branches of production in the food industry. However, the severity depends on the type of product produced, business size, and other factors, with the impacts of cost increases most severe in the sub-industry group, of which the majority – more than 98% -- are MSMEs and SMEs.
Additionally, global oil prices have continued to rise for 4 consecutive weeks, with the price of Brent crude oil going up by 25 cents or 0.3% to US$82.99 per barrel.
High oil prices lead to inflation, and the increased inflation will accelerate interest rates. As oil is a major cost in transportation and the production of various goods, increased costs will lead to higher product prices, which will lead to inflation and affect consumer purchasing power. This will increase the burden on households that already have high debt levels, leading to increased bad debts and negatively impacting the overall economic recovery of the country.
