Economic Highlights (Thailand) – 02/04/2014

Inflation Inched Up In March, But Overall Price Pressures Continue To Remain Benign

u  The headline inflation rate inched up to 2.1% y-o-y in March, from +2.0% in February and compared with +1.9% in January 2013. This marked the fastest pace in nine months, driven by a pick-up in food and non-food prices. Nevertheless, March’s inflation figure came in line with consensus and our expectations. Generally, inflationary pressures continued to remain benign due to lack of demand while consumer sentiment continues to remain dampened by the ongoing political uncertainty.

u  Going forward, inflationary pressures will likely remain benign amid the lack of demand-pull factors, as consumer confidence continues to remain dampened by the elevated household debt burden as well as the ongoing political uncertainties. As a result, we expect the inflation rate to trend slightly upward to 2.5% in 2014, from +2.2% in 2013.

u  The Bank of Thailand (BOT)  reduced the policy rate (1-Day Bilateral Repurchase Rate) for the second time in the previous three meetings, by another 25 basis points to 2.00% on 12 March, as prolonged political problems have raised the downside risks to the country’s economic outlook. As the political environment and economic conditions have yet to improve, we think the BOT may reduce the policy rate further in the coming meetings, if the Thai baht does not weaken by too much.

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