Thailand fights deflation: ten consecutive months of declining consumer prices in January

Thailand faces an unprecedented challenge: in January, the country marked its tenth consecutive month of negative inflation, setting a sad record since the start of the pandemic. Data released by Thailand’s Ministry of Commerce over the week reveal a critical situation on the consumer price front that requires the attention of economists and policymakers.

Consumer Prices in Thailand: Deflation Figures Exceed Expectations

According to Jin10 data, Thailand’s Consumer Price Index (CPI) showed a deeper decline than analysts predicted. Compared to the same period last year, the indicator fell by 0.66%, surpassing the average consensus of economists. When assessing monthly changes, the situation was even more negative: prices decreased by 0.28%, again falling below market expectations, indicating a more persistent deflation trend.

However, the picture becomes more complex when considering core inflation. Excluding volatile components—energy and fresh food—the indicator increased by 0.6% year-over-year, aligning with preliminary forecasts. This divergence between overall and core inflation suggests that deflation in Thailand is largely driven by energy and food prices.

Global Context: How Falling Oil Prices Affect Thailand’s Economy

Nattaya Suchinda, Deputy Director of the Office of Trade Policy and Strategy at the Ministry of Commerce, explained the main drivers of the current situation during an official briefing. According to her, consumer prices in Thailand will continue to face downward pressure throughout the first quarter of the year, due to two key factors: record-low global oil prices and government programs subsidizing electricity and fuel.

Government support for the energy sector plays a dual role. On one hand, subsidies protect consumers from price spikes and support social stability. On the other hand, they obscure the true market dynamics and delay the economy’s adjustment to global market realities. The combined impact of these factors exerts pressure on inflation in Thailand, keeping it in negative territory.

Horizon 2026: When Thailand Expects Inflation to Recover

Thailand’s Ministry of Commerce has issued an optimistic forecast regarding inflation dynamics in the coming quarters. It is expected that in the second quarter, inflation will turn around and enter a phase of “moderate positive growth.” This assumption is based on anticipated normalization of global oil prices and the gradual winding down of certain government subsidies.

For the entire year, the ministry officially maintains its forecast in the range of 0% to 1%. Such a conservative corridor reflects cautious optimism by authorities, acknowledging global market uncertainties but also expecting a gradual normalization after ten months of deflation. For Thailand, this scenario would mean emerging from a critical situation, but the impact of exogenous factors on global energy prices and their transmission to the local economy remains an open question.