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NEWS UPDATES Asean Affairs           25   July  2011

New Thai government could lift inflation

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Spending by the new government aimed at stimulating short-term demand could keep inflation "stubbornly high", warns the Bank of Thailand.

The central bank maintains this year's economic growth forecast at 4.1 percent and headline inflation at 3.9 percent, excluding spending plans by the new government.

The central bank has slightly increased its forecast for core inflation, its main concern, to 2.4 percent from 2.3 percent.

However, Paiboon Kittisrikangwan, an assistant governor, said the fiscal spending plan by the presumptive Pheu Thai Party-led government could spur domestic demand and drive inflation expectations upward.

The central bank's worst-case scenario for inflation now is that it could hover stubbornly high, he said.

"If the government measures are biased toward short-term stimulus of demand, it may increase the pressure that keeps inflation high," he said.

He said that chief among inflation-driving measures would be the party's election pledge of a 300-baht daily minimum wage, representing increases of 40-90 percent across the country if it is realized.

Labor costs would be driven up, with the increase passed on to consumers in the form of higher goods prices.

"Inflation is driven by both the demand and the supply side," said Mr Paiboon. "Manufacturers could gradually pass on the increase to consumers amid a healthy economy."

Pheu Thai has still not been clear about the scope or timing of its plan.

Other measures promised include crop mortgages at premium prices, free tablet computers for schoolchildren, and soft loans by state banks for consumption and investment projects.

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This year in Thailand-what next?

AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

The first issue that can’t be answered is the health of Thailand’s beloved King Bhumibol, who is now 83 years old. He is the world's longest reigning monarch, but elaborate birthday celebrations in December failed to mask concern over his health. More


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