Central bank : Inflation to be a major threat

ECONOMY

Central bank : Inflation to be a major threat

PARISTA YUTHAMANOP

Accelerating inflation due to commodity prices will be a key economic negative factor next year, according to Tarisa Watanagase, the Bank of Thailand governor.

The central bank has not finalised the inflation forecast for 2008, but rising global commodity prices could lead to a higher local figure, Dr Tarisa said yesterday.

''Inflation is my concern. There are many factors that could push it up including rising oil, agricultural product and other commodity prices,'' she said.

The Finance Ministry expected the headline inflation, as measured by the consumer price index, to stand at 4% in 2008. The central bank's existing forecast put the inflation at 1.5-2.8% next year, with a revision due at the end of January.

''It is difficult to predict if prices will rise as much as 4% as in the ministry's forecast. The key factor for the inflation is oil prices, which are difficult to predict in a long-term trend,'' she said.

The Fiscal Policy Office (FPO) expected the Dubai oil price to stand at $83 per barrel in 2008, compared with $68 per barrel in 2007. Each one-dollar rise in crude prices will add 30 satang to the retail oil prices and 0.3% to inflation.

The FPO expects the minimum wage hike by 1-7 baht across the country to affect the inflation only minimally, in a range from 0.02% to 0.11%. The baht is expected to strengthen to 33.80 baht to a dollar in 2008, compared with 34.60 baht to a dollar in 2007.

The FPO expects each one-baht appreciation against the greenback to bring down the pump prices by 60 satang per litre and reduce inflation by 0.1% per year.

It expects the bus-fare hike by 50 satang to one baht and the lift of cooking-gas subsidy to have a marginal effect on inflation.

The planned 1.20-baht increase in cooking gas price per kilogramme will increase inflation by 0.02%.