Thailand's headline inflation likely to remain in negative territory in coming months

THAILAND'S headline inflation is likely to remain in negative territory in the coming months, though the downward pressure on prices should ease gradually as more business activities resume after the lockdown measures have been lifted said ANZ Research in a note on Thursday.

Thailand's headline inflation in May fell to a new post-GFC low, led by food and housing components.

The country's headline consumer price index (CPI) declined by 3.44 per cent in May from a year earlier. The reading compared with ANZ's forecast decline of 2.40 per cent, and with April's 2.99 per cent fall.

The annual core inflation rate was 0.01 per cent, compared with a forecast of 0.36 per cent. April's core inflation rate was 0.41 per cent.

Notably, the main drag on core inflation was housing prices (include utilities), which fell 5.61 per cent year-on-year following a 4.56 per cent decline in April.

Most other non-food components either saw prices rise at a similar (such as clothing & footwear, tobacco & alcoholic beverages) or faster (such as personal & medical care, recreation & education) pace in May relative to April. Meanwhile, transport deflation eased.

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With the economy now reopening, downward pressure on prices should gradually ease. Nonetheless, persistent uncertainty surrounding the pandemic and the legacy of job losses will hamper consumer demand and keep price pressures weak, said economist Krystal Tan and chief economist for Southeast Asia and India Sanjay Mathur.

The strength of the Thai baht is also a headwind to growth and inflation.