Thailand's inflation to inch a tad higher to 2.4%

Here are 2 factors that'll determine inflation's trajectory.

According to DBS, June CPI is expected to reach 2.4%YoY, up just a notch from 2.3% in the preceding month.

Here's more:

Inflation has not been a concern over the past six months as momentum in the economy slowed and the baht stayed relatively strong (until the past two months). As a result, core inflation reached just 1.2% YoY in May, down from 1.8% in end-2012.

More recently, the sharp sequential increases in vegetable and fruit prices bear watching with prices in this component rising by 14% in level terms since February.

Going forward,the inflation trajectory depends on commodity prices and the pace of domestic demand growth. With the outlook on the global economy staying lackluster, it is unlikely that commodity prices would be adding to price pressures.

Regarding the pace of domestic demand growth, a lot depends on the execution of the government’s infrastructure plan.

With the THB 350bn water management project running into delays due to the need to conduct environmental impact and health impact assessments, there are downside risks to our 5% GDP and 2.9% inflation forecasts for 2013.

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