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8 May 2013

Thai Economy

Inflation, 2Q13: Likely Decline on Slowing Domestic Spending (Business Brief No.3427 Full Ed.)

Demand-pull inflation will likely be subdued in 2Q13 after several private spending indicators have begun to ease from the previous months consistent with a situation where the transfer of higher cost burdens to end-products has been inhibited somewhat. The latest inflation data for April continued to decline at 2.42 percent YoY, down from the 2.69 percent YoY pace reported for March, attributable to declines in global crude oil prices and an appreciating Baht. Core Inflation came in at 1.18 percent YoY in April, down from the 1.23 percent YoY in March.
We at KResearch have assessed that sluggish domestic consumption foreseen in 2Q13 as a result of slowing economic activities should not drive up inflation to grow much over that reported in March and April. We expect that the inflation rate in 2Q13 may average no higher than 2.4 percent YoY, versus 3.1 percent YoY in 1Q13. Thereafter, it is expected to rise slightly in 4Q13 on rising costs foreseen for the business sector. Given this, 2013 inflation may fall to perhaps 2.6 percent, which would thus be lower than our previous forecast at 3.3 percent. This rate should not inhibit private spending much.

Meanwhile, it is expected that the Monetary Policy Committee (MPC) will unlikely place greater weigh on easing inflation much at their upcoming regular meeting on May 29, as long as the Thai economy continues to expand at a rate close to their forecast. This is because their priority remains directed toward economic stability, as seen from their attempts to prevent certain sectors from overheating, and efforts to curb rapid growth in certain types of loans.

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