Thailand: Inflation surprised to the downside in October – UOB

In Oct, Thailand’s headline CPI declined by 0.31% y/y from +0.30% y/y in Sep, a marked turnaround in 25 months since Aug 2021. The government’s subsidies for energy and electricity prices were the main drivers of a drop in the headline figure on the back of a decline in both food and non-food prices. During Jan-Oct 2023, headline inflation rose 1.60% y/y. Core inflation edged up marginally to 0.66% y/y from 0.63% y/y in Sep. Year-to-date, core inflation increased 1.41% y/y. This continued to reflect moderate inflationary pressures. With a rapid disinflation starting in the middle of 2023, the headline inflation trend so far has moved within the Bank of Thailand (BOT)’s target range of 1%-3%.   

The Oct deflation rate was significantly attributed to the government’s subsidies for energy and electricity costs to help relieve costs of living which have been rolled out since late Sep. This was reflected by a fall in energy inflation to -1.55% y/y in Oct from +1.21% y/y in Sep. In addition, food and nonalcoholic beverage inflation continued to ease driven by a large drop in raw food prices on the back of improved supply conditions. 

Based on the latest inflation outturn in Oct, we expect that inflationary pressures will continue to moderate during 4Q23, and we maintain our projection for the headline inflation to average 1.6% in 2023 before rebounding to an average of 2.6% in 2024.