Thailand: Inflation receded further in September – UOB

UOB Group’s Economist Enrico Tanuwidjaja and Economist Sathit Talaengsatya assess the recently published inflation figures in Thailand.

Key Takeaways

Thailand’s headline inflation in Sep slowed further to 0.3% y/y compared to 0.88% y/y in Aug, driven primarily by a decline in both food and non-food prices. Year-to-date, headline inflation rose 1.82% y/y. Core inflation also eased slightly to 0.63% y/y from 0.79% y/y in Aug. Year-to-date, core inflation increased 1.50% y/y. The headline inflation has been below the Bank of Thailand (BoT)’s target band of 1-3% since Mar 2023. 

Easing inflation in Sep was significantly attributed to the government’s subsidies for energy and electricity costs to help relieve costs of living. In addition, food and non-alcoholic beverage inflation turned negative for the first time in almost 2 years, owing to a large drop in raw food prices. 

The authorities expect that inflationary pressures would continue to moderate primarily due to lower food prices, government measures to relieve costs of living, higher interest rates, high base effect in the previous year, while noting that there are some upside risks to the outlook, particularly a stronger domestic demand, global energy prices, the adverse effects of the El Niño phenomenon. The latest inflation outturn in Sep confirmed our view that inflationary pressures will continue to moderate, and we maintain our projection for the headline inflation to average 1.6% in 2023 and rebound to the average of 2.6% in 2024.