Thailand’s inflation rate has returned to the central bank’s target range for the first time since May 2023, as rising energy and food prices propelled headline inflation upward in December. The country’s economic trajectory, was characterized by subdued inflationary pressures over the past year.
The Ministry of Commerce announced on Monday that the headline consumer price index (CPI) rose by 1.23% in December 2024 compared to the same month a year earlier. This is a noticeable increase from November’s annual rise of 0.95% and falls within the Bank of Thailand’s (BoT) target range of 1% to 3%. However, the figure slightly underperformed the 1.47% rise projected by a Reuters poll.
The 1.23% increase in headline CPI in December reflects upward pressure from higher energy and food prices, which are critical components of Thailand’s consumption basket. Core CPI, which strips out volatile food and energy prices, rose by 0.79% year-on-year in December, narrowly missing the expected increase of 0.81%.
For the full year of 2024, average annual headline inflation stood at a modest 0.40%, while core inflation reached 0.56%. These figures indicate that inflationary pressures have remained relatively mild, despite December’s uptick.
The inflation rate in January 2025 is anticipated to remain at approximately 1.25%, with headline inflation expected to stay above 1% throughout the first quarter, according to Poonpong Naiyanapakorn, director of the Ministry’s Trade Policy and Strategy Office.
The Ministry of Commerce has maintained its forecast for headline inflation in 2025, predicting a range of 0.3% to 1.3%. This outlook is supported by expectations of stronger economic growth and the implementation of government stimulus measures.
Finance Minister Pichai Chunhavajira recently emphasized the importance of steering inflation toward the midpoint of the central bank’s target range. He also stressed the need to ensure the competitiveness of the Thai baht, which has faced pressure in recent months amid global currency fluctuations.
The Bank of Thailand has also been monitoring inflation closely. On December 18, the BoT kept its key interest rate unchanged at 2.25%, following a surprise rate cut in October. The central bank has forecast headline inflation to reach 1.1% in 2025, aligning with its broader objective of maintaining price stability while supporting economic recovery.
The next policy review, scheduled for February 26, 2025, is expected to provide further insights into the central bank’s approach to balancing inflationary concerns with growth objectives.
The December inflation uptick was largely driven by higher energy and food prices. Energy costs have been volatile in recent months due to fluctuating global oil prices and domestic fuel adjustments. Food prices, meanwhile, have been influenced by seasonal factors and supply chain constraints.
Thailand’s reliance on energy imports has made it particularly sensitive to global price trends. Rising crude oil prices in the fourth quarter of 2024, combined with adjustments in domestic fuel tariffs, have contributed to higher energy costs for households and businesses.
On the food front, increased prices for essential commodities such as rice, meat, and vegetables have also played a role. Unseasonal weather patterns and logistical challenges have compounded supply-side pressures, adding to consumer costs.
Thailand’s inflation developments are part of a broader regional trend. Across Southeast Asia, countries are grappling with the dual challenge of maintaining price stability while fostering economic recovery.
Neighboring economies, such as Malaysia and Indonesia, have similarly seen inflation rates creep upward, driven by a mix of external factors like global energy prices and domestic consumption dynamics. However, Thailand’s relatively low inflation rate compared to its peers underscores its unique economic circumstances, including subdued domestic demand and proactive fiscal measures.
Globally, inflation trends remain a focal point for policymakers as central banks in major economies weigh interest rate decisions against the backdrop of mixed growth signals. Thailand’s ability to navigate these dynamics will depend on a combination of monetary prudence and targeted government interventions.
Thailand’s economy is projected to grow more robustly in 2025, buoyed by recovering tourism, increased exports, and government stimulus initiatives. The tourism sector, a cornerstone of the Thai economy, has shown signs of recovery as international travel rebounds following the pandemic.
Export growth, particularly in key sectors like electronics and agriculture, is expected to contribute to economic momentum. Government initiatives, including infrastructure investments and social welfare programs, are also likely to play a significant role in supporting growth and boosting consumer confidence.
However, challenges remain. Rising costs could dampen consumer spending power, while external risks, such as geopolitical tensions and global economic uncertainties, may impact Thailand’s export-driven economy.
The Bank of Thailand faces a delicate balancing act as it seeks to keep inflation within the target range while supporting economic recovery. With the key interest rate currently at 2.25%, policymakers are likely to adopt a cautious approach in the coming months.
The central bank’s December decision to hold rates followed an earlier surprise rate cut in October, which was aimed at stimulating economic activity. The February policy meeting will be closely watched for any adjustments in response to evolving inflationary and growth dynamics.
On the fiscal front, the government’s stimulus measures are expected to focus on infrastructure development, digital transformation, and social programs. These initiatives are aimed at addressing structural challenges while providing a near-term boost to economic activity.
