Bank of Thailand raises inflation forecast


BANGKOK, July 22 – The Bank of Thailand (BoT) conceded today that the accelerating inflation rate is of concern, and revised its core inflation projection to 2.4 per cent from its earlier 2.3 per cent projection this year, and from 2.1 per cent to 2.3 per cent for 2012, according to Paiboon Kittisrikangwan, Assistant Governor heading the Monetary Policy Group.

Meanwhile, the BoT keeps its headline inflation rate at 3.9 per cent this year and at 3.2 per cent in 2012.

The BoT has maintained Thai economic growth or Gross Domestic Product (GDP) so far in 2011 at 4.1 per cent and 4.2 per cent regardless of the implementation of the new government’s fiscal policies which are yet to be put into practice.

The bank conceded that the risk of accelerating inflation is of more concern than the risk regarding economic growth because in the second half of this year, inflation is rising rapidly due to the burden of increasing capital costs being passed on from entrepreneurs to consumers,  Mr Paiboon said.

The new government’s economic stimulus measures–particularly the planned increase of daily wage to Bt300 which is not on par with the development of labour skills–as a one-time jump will definitely negatively impact the costs of production, so the bank has its inflation forecast upward, he said.

The economy in the second half of this year is continuing to expand, thanks to exports expected to grow 22.4 per cent in tandem with the global economy and the better-than-expected recovery of the Japanese economy.

The private sector is likely to expand 10 per cent and private consumption to rise 3.8 per cent. Imports are projected to grow 26.9 per cent. However, the European debt problem and the

American financial crisis must be monitored as they have an impact on the foreign capital inflow to Thailand.

It is believed that Europe will be able to tackle the problem with a large cash influx. The baht is likely to strengthen further based on Thai economic fundamentals and currency volatility continues, the BoT executive said.