Tuesday, June 3, 2008

Thailand Inflation at 10-year high

May rate of 7.6 per cent forces BOT to revise its forecasts

BANGKOK: -- Thailand's inflation rate soared to 7.6 per cent in May, the highest in nearly a decade, due to the unrelenting rise of oil prices.

According to the Commerce Ministry, May inflation was the highest since August 1998, prompting the Bank of Thailand to announce it would revise its economic growth and inflation rate forecast for the year.

"The BOT will revise its forecast of economic indicators again as oil prices now have already surged higher than the worst-case scenario," BOT senior director Amara Sriphayak said.

The central bank forecast for GDP growth in 2008 is currently 4.8 to 6 per cent. The central bank also forecast headline and core inflation for this year at 4-5 per cent, and 1.5-2.5 per cent, respectively.

Amara said the inflation rate is a cause for concern as oil prices are rising continually. Currently, however, the central bank considers an equal risk between growth and inflation.

"Higher inflation and the rising cost of living because of oil prices makes people more cautious about spending money," Bloomberg quoted Kasikornbank president Prasarn Trairatvorakul as saying.

Consumer confidence, which fell for the first time in six months in April, may decline further in coming months as oil prices increase, said Thanavath Phonvichai, an economist at the University of Thai Chamber of Commerce.

According to Bloomberg, Indonesia's consumer prices rose 10.4 per cent in May from a year ago, while India's inflation has accelerated to its fastest pace in more than three and a half years.

The Thai government also asked four refineries controlled by state-owned PTT to cut diesel prices for six months to ease inflation.

"The ministry will look at all products to see what we can do to reduce the public's burden," Bloomberg quoted Commerce Ministry permanent secretary Siripol Yodmuangcharoen as saying.

The inflation rate in Thailand, Southeast Asia's second-largest economy, may be as high as 5.8 per cent this year, up from 2.3 per cent in 2007.


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