Thailand’s economy still hurting from floods
As the country’s inflation is expected to jump 4% in December.
According to DBS, food prices rose by 11% MoM in November as floods hurt output and nudged overall inflation higher to 8% MoM and 4.2% YoY.
Here’s more from DBS:
The economic impact of the floods has been clearly greater than expected. Production fell by a further 25% in November from levels in October, taking the on-year rate of contraction to 50% in November from 35% in October. The annual drop in production in November is three times larger than the worst monthly drop in production in the Asian financial crisis period (May 1998: -14% YoY) and two and half times larger than in the global financial crisis (Jan 2009: -21% YoY). Even if output rises sharply in December, as we expect, GDP growth may fall short of the current estimate of 1% in 2011 and may be closer to zero. Perversely, however, this would point to a faster rate of growth in 2012 than the current forecast of 5%, purely for technical reasons,
lifting growth to 6% or higher.
Inflation numbers for December are on tap today. Prices are expected to rise by 4% YoY and 6.5% MoM, saar. Food prices rose by 11% MoM, saar in November as floods hurt output and nudged overall inflation higher to 8% MoM, saar and 4.2% YoY. The impact of shortages on demand / prices could be felt more acutely in December and January as stocks are run down. Accordingly, inflation could surprise on the upside relative to market expectations. We presently do not envisage a series of interest rate cuts by the central bank and have just one 25bps rate cut in the forecasted rate trajectory. The central bank is expected to veer to the centre as it accounts for the two-way (growthand price) risks arising from expansionary government spending (upside) and from European debt crisis (downside).
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Tags: thailand inflation December 2011, thailand economy, thailand floods, thailand GDP 2011, food inflation
