Thailand’s inflation rate experienced a noteworthy decline for the fifth consecutive month in May, primarily attributed to reduced prices of electricity and fuel. However, economic experts remain cautious, warning that the current downward trend might be short-lived. They emphasize the potential for inflation to rebound in the near future due to two significant factors: a plausible increase in minimum wages and the impending drought season.
According to Wichanun Niwatjinda, Deputy Director of the Trade Policy and Strategy Office, Thailand’s inflation rate plummeted to a mere 0.53% in May, reaching its lowest point in 21 months. This decline was primarily driven by a considerable decrease of 1.83% in non-food and non-drink prices. However, it is worth noting that prices of certain essential items such as vegetables and eggs witnessed an increase due to reduced production. Furthermore, the cost of processed food escalated as a consequence of higher production expenses.
Despite the current low inflation rate, Deputy Director Wichanun Niwatjinda has raised concerns about potential inflationary pressures in the near future. The looming drought season is expected to disrupt agricultural production, thereby impacting prices. Additionally, if the proposed minimum wage increase comes into effect, it could further elevate production costs and subsequently contribute to inflationary pressures. These factors combine to present a precarious outlook for Thailand’s inflation rate in the coming months.
In addition to the inflation concerns, the Thai National Shippers’ Council has reported a decline in industrial exports. In April, exports of electronic equipment and appliances to key markets such as the United States and China registered a year-on-year decrease of 7.6%. The Council has projected a further decline of 1% in export growth for the entirety of 2023. Consequently, it has urged the newly formed government to actively promote and support export-oriented industries. However, this must be done while exercising caution to safeguard the interests of small and medium-sized enterprises. Adjusting policy rates to strike the right balance becomes crucial in order to stimulate export growth without jeopardizing the stability and growth potential of smaller businesses.