ASEAN KEY DESTINATIONS
New Thai government could lift inflation
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.
Letters that do not contain full contact information cannot be published.
Letters become the property of AseanAffairs and may be republished in any format.
They typically run 150 words or less and may be edited
submit your comment in the box below