The rising cost of living is slowing down the local economy

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Thailand’s economic activity showed signs of slowing in the second quarter due to the rising cost of living, according to the World Bank of Thailand.

The bank’s Monthly Economic Monitor in May reported that indicators of economic activity in the second quarter of this year show signs of slowing.

The survey results reveal that the rising cost of living, particularly higher energy costs attributed to the war in Ukraine and pandemic concerns, have affected consumer spending.

The Mobility Index remained unchanged in April and May at 16 points, despite new Covid-19 cases falling to an average of 8,193 per day in the first two weeks of May, from more than 20,000 cases in March and April.

In contrast, the mobility index of regional peers, including Malaysia, Indonesia and the Philippines, improved significantly as new cases fell.

Mobility indices in Indonesia and the Philippines have surpassed their pre-pandemic levels, the World Bank said in the report.

The private consumption index for Thailand in March fell 0.9% month-on-month, while the consumer confidence index in April fell for the fourth consecutive month to 40.7 points, down 1.3 points from the previous month.

The World Bank report indicates that inflation continues to remain above the Bank of Thailand’s target range, driven by energy and food prices.

Headline inflation eased slightly to 4.7% in April, after hitting a 13-year high in March (5.7%), but remained higher than regional peers.

Inflation continued to exceed the central bank’s 1-3% target range for the fourth consecutive month.

Energy price inflation eased slightly in April as global oil prices edged down.

By contrast, food commodity prices continued to rise at 3.5% year-on-year, while core inflation remained at 2.0%.

Rising energy prices are expected to continue to be the main contributor to higher headline inflation, with electricity and cooking gas prices expected to rise further in May and June.

Although the diesel price cap of 30 baht per liter ended on May 1, the government raised it to 32 baht per liter and plans to subsidize half the price above 30 baht per litre.

However, inflation expectations remain well anchored, with expectations below 2% for the next 12 months as well as the next five years, according to the central bank’s business survey and consensus forecast.

However, the World Bank reported that Thailand’s economy grew faster than expected in the first quarter of 2022, supported by the easing of Covid-19 restrictions, continued stimulus measures and strong exports.

In the first quarter, the Thai economy grew 2.2% year-on-year, compared to 1.8% in the previous quarter.

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