ttb analytics forecasts that inflation in 2022 will reach 2%, preparing for inflation to accelerate to a peak of 4% in the first quarter before gradually decreasing for the remainder of the year as various domestic and international price pressures ease sequentially.

According to the TTB Economic Analysis Center or ttb analytics, the pressure from the energy sector, particularly fuel prices, remains a significant factor keeping inflation high in 2022. Although Thailand benefits from government measures to stabilize certain fuel prices, this is insufficient to alleviate the rapidly rising price pressures. It is estimated that after entering the second quarter of 2022, energy price pressures will ease somewhat, but will persist until oil producers can manage to gradually increase production capacity to meet targets in the third quarter.

 

Meanwhile, the costs of fresh food have increased in line with rising oil prices and global commodity prices, coupled with the outbreak of swine disease in Thailand, which has reduced pork production and driven up domestic pork prices. It is expected that Thailand may need at least six months to increase pig farming and gradually boost production into the market, resulting in sustained pressure on fresh food prices until the end of 2022.

Furthermore, the pressure on core inflation (inflation excluding fresh food and energy) is expected to ease in early 2022 due to the rapid spread of the Omicron variant of COVID-19, which does not lead to severe illness. It is anticipated that this impact will only last in the first quarter of 2022, before domestic economic conditions and core inflation gradually increase again until the end of the year.

 

 

Expect Supply Bottlenecks to Normalize by Late 2022

            Additional inflationary pressures stem from supply bottlenecks in certain industries, particularly those linked to domestic producers facing a new wave of outbreaks, especially in Europe and the U.S. However, it is expected that production bottlenecks and high shipping costs will clearly pressure prices in both core and non-core inflation categories until the third quarter, before easing towards the end of the year.

            Shipping costs have been gradually decreasing since late 2021, but it is expected to take a long time to return to normal price levels, around late 2024.

       Additionally, high supply-side pressures, coupled with the depreciation of the baht since 2021, will result in Thailand's inflation averaging 2.7% until the end of Q3/2022, peaking in the first quarter and gradually decreasing until the end of the year as various factors ease, with the overall inflation rate for the year averaging 2%.

           However, during this period of rapidly accelerating inflation, citizens must adjust their spending habits accordingly. For the government overseeing the economy, in addition to expediting policies to reduce living costs, including stabilizing fuel prices and providing assistance through the state welfare card to citizens, it may also help manage production levels to meet domestic demand where feasible, to further alleviate inflationary pressures.