Regional News
BANGKOK—The Thai government will raise the minimum monthly wage of civil servants to 15,000 baht (about $500) as of Jan. 1, Deputy Finance Minister Viroon Techapaiboon said.
The increase from the current 10,000 baht will cost the government 20 billion baht a year, he said on Thursday. The government also hopes to encourage private-sector companies to raise the starting monthly salary of newly graduated employees to 15,000 baht.
The prospect of the pay raise has spurred concerns about an increase in price pressures. Inflation in Thailand accelerated last month, with the consumer price index up 4.29% from a year earlier, compared with July’s 4.08%, Commerce Ministry Permanent Secretary Yanyong Phuangrach said.
The acceleration, driven by food and fuel prices, also raises the prospect of further policy-rate increases even though the central bank expects upward pressure on core inflation to ease.
“This upward surprise on inflation is rather worrying,” said Santitarn Sathirathai, an economist with Credit Suisse in Singapore. “Inflation pressure is still very much alive” with the risk of core inflation breaching the upper end of the central bank’s range now “incredibly likely.”
Core CPI, which excludes energy and food costs, was up 2.85% from a year earlier, still within the central bank’s 0.5% to 3% target range. The August CPI was up 0.43% from a month earlier, while core CPI was up 0.27%.
A Dow Jones Newswires poll of six economists had forecast the CPI would be up 3.97% from a year earlier and 0.1% from the previous month, while core CPI would be up 2.7% and 0.04% over those periods.
Mr. Yanyong told a news conference the ministry still expects headline inflation for the full year to be 3.7%, with price pressures starting to ease in the fourth quarter because of declining oil prices.
Separately, Bank of Thailand Governor Prasarn Trairatvorakul said Thursday he now believes softer oil prices should help prevent the central bank’s inflation target from being breached this year—a switch from his previous projection.
Still, Credit Suisse’s Mr. Sathirathai said the upward surprise in August inflation may complicate the Bank of Thailand’s next monetary policy decision on Oct. 19, particularly given signs of an economic slowdown.
After raising its policy rate by 0.25 percentage point to 3.5% on Aug. 24, bringing the total increase since the upward cycle began in July 2010 to 2.25 percentage points, the central bank suggested the cycle may soon end.
The Bank of Thailand is under pressure to steer the economy, as the new government has pledged to focus on economic growth. The central bank prefers stability to growth.
Write to Oranan Paweewun at [email protected] and Leigh Murray at [email protected]
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By: Oranan Paweewun and Leigh Murray
Source: The Wall Street Journal, Sept. 2, 2011
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