Thai Inflation Slows as Oil Price Falls, Demand Cools
Thailand’s inflation rate fell by the most in almost nine years, giving scope for the central bank to cut interest rates further to support economic growth.
Consumer prices rose 0.4 percent in December from a year earlier, the Commerce Ministry said today in Bangkok. The pace is the slowest since September 2002 and compares with the median 1.4 percent estimate of 13 economists in a Bloomberg News survey, and November’s 2.2 percent gain.
The Bank of Thailand may cut its benchmark interest rate for the second time in as many months next week as inflation slows and economic risks increase. Southeast Asia’s second- biggest economy may shrink this quarter and might have contracted in the last as the global recession weighs on exports and political squabbling quashes consumer spending.
“We should see the interest rate fall further,” Finance Minister Korn Chatikavanij said today in Bangkok. “Rate policy will follow the same direction as the government’s plan to boost the economy.”
The baht erased an earlier loss and was little changed at 34.78 per dollar as of 2:42 p.m. in Bangkok, according to data compiled by Bloomberg. The SET Index of stocks extended gains, climbing 4.8 percent, poised for its biggest daily advance in two months.
Seeking Growth
Prime Minister Abhisit Vejjajiva, elected by parliament Dec. 15 as the third premier in four months, is meeting today with Bank of Thailand Governor Tarisa Watanagase to seek ways of boosting the nation’s economy, hurt by months of anti-government street protests and cooling global demand.
Core prices, which exclude fresh food and fuel, climbed 1.8 percent in December, slower than a 2 percent increase in the previous month, the Commerce Ministry said today. The median estimate of nine economists surveyed by Bloomberg News was for a 1.7 percent gain.
“The softer inflation readings against the backdrop of deteriorating growth outlook supports our view that the central bank will continue cutting rates,” Prakriti Sofat, an economist at HSBC Holdings Plc in Singapore, wrote in a note to clients after today’s inflation release no fax cash loans.
She expects the central bank to have reduced its rate by 150 basis points to 1.25 percent by June 30.
Indonesia, Philippines
Slowing demand and easing oil prices cooled Indonesia’s inflation to a six-month low in December, a government report said today. Philippine consumer-price increases likely eased to the least in eight months, a National Statistics Office release may show tomorrow.
The cost of crude oil in New York has dropped 68 percent a barrel from a record in July. Thailand relies on imports to meet most of its energy needs. Asian governments are preparing more measures to boost growth as a slump in global demand hurts exports amid recessions in the U.S., Europe and Japan.
“We expect an inflation rate of between zero and 1.2 percent this year,” said Siripol Yodmuangcharoen, permanent secretary of the Commerce Ministry. “The rate may go into negative territory if oil prices fall below our forecast.” The government predicts the price of Dubai crude, which it uses as a benchmark, will average between $50 and $60 a barrel this year.
Central bank policy makers have said they may again use monetary policy to buoy gross domestic product. The Bank of Thailand’s one-day bond repurchase rate is 2.75 percent after last month’s 1 percentage-point cut. Policy makers next meet on Jan. 14.
Thailand’s economy may have contracted by 1 percent last quarter, Ramya Suryanarayanan, an economist at DBS Group Holdings Ltd. in Singapore, said in a note to investors today. GDP may also shrink in the three months ending March 31, the Finance Ministry said Dec. 24.
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