Thailand’s March consumer prices fall on cheaper oil

Thailand’s consumer prices fell for a third month in March as oil costs halved from a year earlier and the deepening global recession weakened demand. The consumer prices dropped 0.2 percent from a year earlier, after declining 0.1 percent in February, the Commerce Ministry said today in Bangkok. The median estimate of 14 economists in a Bloomberg survey was for a 0.4 percent decline. The falling prices have allowed Thailand’s central bank to reduce its key interest rate by 2.25 percentage points to 1.5 percent since early December, its most aggressive string of cuts ever.

The governor Tarisa Watanagase said borrowing costs can be eased further if needed to sustain the economy, which the government may contract for the first time in 11 years. “This gives more room for the central bank to cut interest rates,” said Julia Goh an economist at CIMB Investment Bank Bhd. in Kuala Lumpur. “But there’s not so much the rate can do now against the backdrop of weak demand and tight bank lending.

Here Prime Minister Abhisit Vejjajiva is boosting, spending and giving cash handouts to low-income earners to help spur local demand, hurt by political turmoil and the worsening economic outlook.

The price of crude oil, almost all of which Thailand imports, has fallen 52 percent in the past year. Manufacturing production dropped for a fourth month in February, the longest contraction in a decade. “The oil price is the key factor dragging consumer prices into negative territory,” Siripol Yodmuangcharoen, permanent secretary for commerce, told reporters in Bangkok today.

The commerce ministry said, “Thailand’s core inflation index, which excludes fresh food and fuel, rose 1.5 percent last month from a year earlier”.