Posted on 04 Jun 2008
Inflation accelerated to nearly a 10-year high in May on
soaring oil and food prices. The rise in the Consumer Price Index from May of
last year was 7.6%, up from 6.2% in April, 5.3% in March, 5.4% in February and
4.3% in January.
The yearly increase was the highest since August 1998.
Siripol Yodmuangcharoen, the permanent secretary of the
Commerce Ministry, attributed the rise mainly to food and beverage prices,
which rose 11.8%. The non-food sector was up 5.1%, driven by fuel prices, which
rose 31.2% over the same period last year.
Prices rose fastest for rice, flour and cereal products,
meats, fresh chicken, eggs and dairy products, and seasonings and condiments.
On a monthly basis, the consumer price index rose 2.1% from
April because of continued increases in energy prices, which pushed up
production and transport costs.
Mr Siripol added that higher global demand also pushed up
rice prices.
Prices of the non-food sector increased 1.7% from April with
the key factor still being energy costs.
Local oil companies last month raised their retail prices
several times both for gasoline and diesel, propelling up prices of fuel oil by
9.0%.
For the first five months, the annual inflation rate was
5.8%, with food and beverage prices increasing 8.4%. The non-food sector rose
4.1%, largely because of oil prices.
Core inflation, which excludes fresh food and fuel prices,
accelerated to 2.8% in May from a year earlier, from 2.1% a month earlier.
Finance Minister Surapong Suebwonglee, commenting on the
inflation report, said the government was intent on ensuring that economic
growth this year outpaced inflation to prevent the economy falling into
''stagflation''.
New measures aimed at helping the public cope with rising food
and energy prices, including support for E85 gasohol, would likely not have an
effect until after July, he acknowledged.
Most analysts expect economic growth, which reached 6% for
the first quarter, to slow to 4.5% to 5% for the entire year as inflation
rises. The National Economic and Social Development Board projects inflation at
5.3- 5.8%, up from 3.2% to 3.7% last year.
Somphob Manarungsan, an economist at
''More and more low-income earners are expected to feel the
pinch from high expenses, especially for food and transport, which generally
account for about two-third of income. Worsening spending is anticipated,'' he
said.
According to the economist, weakening domestic consumption
which makes up 60% of gross domestic product was also likely to affect the
country's economic growth prospects.
Mr Somphob also expressed concern over the widening trade
deficit because of growing imports.
Business leaders, meanwhile, said the government needed to
clarify its alternative energy policies and develop new strategies to help the
public cope with inflation.
Pramon Sutivong, said energy policies should also take into
consideration the problems of rising food prices. ''If the government promotes
the planting of energy crops, we will lose area for food crops. The government
needs a clear long-term policy for alternative energy,'' Mr Pramon said.
He said prices for key goods or services should be fixed,
such as transport costs, to minimise the burden of rising prices on consumers.
Tax incentives should also be offered to stimulate the
economy and reduce operating costs for the private sector, such as lower import
taxes for key raw materials such as steel.
Twatchai Yongkittikul, the secretary-general of the Thai Bankers Association, said political risk was also affecting private investment.
