Speaking at the Governor Connect event this week, central bank governor Vitai Ratanakorn said the government’s B400-billion emergency loan decree, together with surging oil imports and supply shortages caused by prolonged war in the Middle East, are the main factors pushing up inflation in Thailand.
The government’s B200bn ‘Thais Help Thais’ subsidy scheme, scheduled for June-September this year, is expected to gradually push up headline inflation, Mr Vitai said, reports the Bangkok Post.
“We expect headline inflation to rise to a peak of 5.2% in October this year, then gradually ease, declining significantly in the second quarter of next year to 1.3%, assuming the war in the Middle East comes to an end," Mr Vitai said.
As inflationary pressures are not considered severe at this stage, the regulator is expected to maintain its policy interest rate.
However, the central bank stands ready to adjust monetary policy in line with changing economic conditions.
With the emergency loan decree, the Bank of Thailand now expects average headline inflation of 3% this year, easing to 1.4% in 2027.
Prior to the decree, the regulator forecast average headline inflation of 2.9% this year and 1.5% next year.
The governor said the spike in inflation is expected to be temporary, mainly driven by a sharp increase in oil imports, particularly in April. The impact on the current account deficit should be limited over the longer term, he said.
In April, the value of exports excluding gold rose 23.4% year-on-year, while imports surged 49%.
As a result, Thailand recorded a trade deficit of US$6.8bn and a current account deficit of US$7.6bn (about B248.23bn), largely due to $7.4bn in oil imports.
“Looking ahead, Thailand’s current account is expected to return to a neutral position this year,” said Mr Vitai.
“The trade balance could return to surplus territory in the fourth quarter.”
The forecast is based on expectations that exports will continue to expand for the rest of the year, while imports are forecast to decline as global oil prices level off. The central bank expects Thailand’s export value of goods to grow by 12-13% this year.
With the emergency borrowing decree, the central bank upgraded its GDP growth forecast to 2% from 1.5%, while private consumption growth is predicted to reach 2.6%, up from 1.6%.
The projections are based on the B200bn subsidy scheme helping people cope with rising living costs, with the remaining B200bn allocated to energy transition initiatives, he said.