Economists are increasingly concerned about potential deflationary trends but the Bank of Thailand (BoT) asserts there are no definitive signs of deflation despite ongoing low inflation.
At a monetary policy forum on Wednesday, July 9, Surach Tanboon, senior director of the central bank’s monetary policy department, stated that the bank has not identified any signals of deflation, although inflation remains subdued.
He attributed the low inflation primarily to decreases in energy and fresh food prices, without a widespread reduction across other sectors. Essential consumer goods prices have been gradually rising, consistent with a persistently high cost of living.
In his remarks, Surach highlighted that categories with consistently increasing prices include everyday items such as ready-to-eat food, cooking ingredients, and non-alcoholic beverages, indicating an absence of deflationary indicators.
Deflation is defined as a general decline in prices for goods and services, often linked with a contraction in the supply of money and credit, resulting in an increase in the purchasing power of currency over time.
The central bank’s forecast indicates a headline inflation rate of 0.5% this year, increasing to 0.8% in 2026. Core inflation is predicted to be 1.0% this year and 0.9% next year. Food category inflation is projected at 1.2% in 2025 and 1.6% in 2026, while energy prices are expected to decrease by 3.2% this year and by 1.3% next year.
Kasikorn Research Centre (K-Research) anticipates continued deceleration in inflation in the third quarter, following a third consecutive monthly decline in June when inflation dropped to 0.25%. This trend has sparked concerns about the potential emergence of deflation.
The ongoing decline in inflation is mainly attributed to supply-side factors such as decreasing energy prices and lower prices for fresh vegetables and fruit. In particular, June saw a decline in prices for rice and durian, partly due to a high base effect from the previous year.
K-Research expects inflation to remain negative during the third quarter before returning to positive levels in the final quarter. The research centre maintains its 2025 inflation forecast at 0.3%, citing continuous downward pressures from falling global energy prices, an influx of low-cost imports from China, and a weakening local economy, reported Bangkok Post.
Sathit Talaengsatya, an economist at UOB Thailand, expressed concern over deflation risks following last month’s price declines, anticipating further deceleration in the second half of the year. He noted that sluggish domestic demand, corresponding with slower economic growth, is a major factor behind the decreasing inflation rate. UOB forecasts inflation of 0.6% at the end of 2025.
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