Efforts to Manage Inflation and Prices of Consumer Goods

(04/05/2012)

The Government is making an effort to ensure that inflation will be manageable and that prices of consumer goods will not be exorbitantly high. Deputy Prime Minister and Finance Minister Kittiratt Na Ranong said that the Government would maintain inflation at a rate of between 2 and 3.5 percent. The Bank of Thailand’s Monetary Policy Committee, during its meeting on 2 May 2012, voted unanimously to maintain the interest policy rate at 3 percent annually. According to the Monetary Policy Committee, the recent easing of monetary policy has boosted the confidence of the private sector and brought about a quicker economic recovery than expected. Even so, external factors continue to be a major risk to growth, while inflation remains manageable. The Monetary Policy Committee was of the opinion that the current policy rate remained appropriate in supporting a smooth return of economic activities to normal levels and in keeping inflation within target. The picking up of the Thai economy in the first quarter of 2012 was also faster than expected. The manufacturing sector is likely to return to normalcy by the end of the second quarter. Private consumption and investment accelerated, supported by stronger consumer and business confidence, along with greater domestic purchasing power. Exports were expected to rebound sooner than previously predicted, in tandem with the recovery of manufacturing production. Based on the assessment of the Monetary Policy Committee, the global economy continued to grow at a gradual pace, with improving signs of recovery. Much of the improvement was attributed to a more favorable economic outlook of the United States. The euro zone economy entered a recession and it would take time for the structural problem to be resolved. Global inflationary pressure would continue, as a result of higher oil prices. Inflation slowed down in April, partly because of the high base of the previous year and the reduction of certain fresh food prices back to their normal levels. However, higher oil prices and an increase in the daily minimum wage are likely to lead to higher production costs. As a result, inflationary pressure in the period ahead is expected to remain. Mr. Kittiratt explained that, in the first quarter of 2012, the global oil price rose from 80 to 120 US dollars a barrel. Faced with this situation, the Government introduced measures to maintain prices of commodities. The measures were successful at a certain level. He stated that the Government had no plan now to increase tax rates. The Ministry of Energy has not yet allowed an increase in cooking gas prices, as well.