September 14, 2021 Krungsri Research Bank of Ayudhya reports that headline inflation this year is likely to be lower than previously expected. The Monetary Policy Committee (MPC) is expected to maintain the policy interest rate after adopting a more direct monetary policy. August headline inflation turned negative for the first time in five months at -0.02% YoY from 0.45% the previous month, mainly due to a sharp drop in fresh food prices. This is in line with the demand for a slowdown during the severe epidemic.
At the same time, the government has measures to reduce the cost of living. by reducing water, electricity and education fees while the price of energy products, although still expanding, but at a slower rate Core inflation (minus fresh food and energy prices) was at 0.07%, decelerating from 0.14% in July.
from the interest rate perspective Although the inflation rate tends to be lower than the previous forecast. and the results of the meeting The latest MPC indicates a 52.7% probability that the MPC will cut the policy rate at its meeting on 29 September, but Krungsri Research expects The MPC will keep the policy interest rate at 0.50%, supported by (i) after some sectors of economic activity resumed somewhat. The number of infected people has dropped from the previous level of more than 20,000 a day, and vaccination progress has been made. (Average over 600,000 doses per day during 1-9 September) and the authorities began to relax more stringent epidemic control measures.
and (ii) at the beginning of last September. The Bank of Thailand has announced additional measures to help SMEs and retail debtors affected by the COVID-19 outbreak, including maintaining liquidity and topping up new debts. and support for financial institutions to assist debtors with long-term debt restructuring that is suitable for debtors. Such additional measures may reflect the emphasis on targeted financial measures to alleviate the financial burden of businesses and households effectively. more on point than the current low policy rate cut. and may not help support the economic recovery
Consumer confidence is still weak. Meanwhile, industrial sentiment began to show positive signs. reflected from the August data. Consumer Confidence Index forecast for the next 6 months The index fell for the sixth straight month to a record low of 46.7 from 47.6 months ago, while the three-month forecasted industrial confidence index rose for the first time in three months to 90.9 from 90.9. 89.3 months ago
However, domestic demand was very weak. Due to the heavy impact of the severe spread of COVID-19 that has dragged on and spread into the factory sector affecting the business sector and Thai households in a wide Recently, even more stringent epidemic control measures have been relaxed. causing some sectors of economic activities to resume But it will remain under the highest and strictest control area (dark red) until at least the end of September. Therefore, economic activity in many sectors and employment is expected to remain sluggish.
In addition, the rising household debt burden continues to depress the recovery of domestic spending. Private consumption is expected to grow at a low 0.5% this year. Trade partner economies are recovering. This year’s exports will grow at 15%, which will help support industrial production.
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