Thailand’s CPI Inflation Rose to -0.8% in Feb while the fall in consumer prices tapered in February to -0.8%, but this was in line with expectations says Maybank IB(Consensus: -0.8%, January 2024: -1.1%). The print marks the tenth consecutive month that CPI inflation was below the target range of 1% to 3%. The prices of energy (-3.3%) and raw food (-2.7%) continued to weigh on the headline number, although by smaller magnitudes.
As for inflation, the country’s core Inflation Slips to 26-Month Low, outside of raw food and energy, core inflation unexpectedly slipped to 0.4% in February (Consensus: 0.5%, Jan 2024: 0.5%), signaling that price pressures are easing at a broad level. Core inflation stood at the lowest in 26 months. The domestic cost of apparel and footwear (-0.2% vs Jan 2024: -0.1%) as well as housing (-0.8% vs Jan 2024: -0.7%) fell at slightly faster rates. There have been increasing scrutiny on the fall of consumer goods prices, against the backdrop of an influx of cheap imports from China.
Headline Inflation Weighed Down by Energy, CPI Inflation Projected at 1.1% in 2024
With the government extending its lowered electricity bill rates until August 2024, this is expected to weigh on headline inflation for the first three quarters. At the same time, the implementation of minimum wage increases in January (with different increases applied to various regions), with another wave of hikes expected in March, could exert upward pressure on prices, at a time when economic growth is expected to have recovered somewhat. We maintain our inflation forecast at 1.1% in 2024.
BOT Expected to Cut by 25 bps in April
Even if the decision may not be unanimous, the house expects the BOT to tweak its policy rate with a 25 bps cut to 2.25% at its next meeting on 10 April, largely to bring the real policy rate to levels more congruent with weaker growth and lower inflation. The BOT is unlikely to embark on an easing cycle for the rest of the year, amidst concerns of inadvertently fueling a resurgence in household debt. With clearer signs of a speedy passage of the delayed government budget, Maybank IB expects GDP growth to pick up to +3.2% in 2024, from +1.9% in 2023.
