At last, BOT revises inflation forecast : 4 to 5 % for 2008

The Bank of Thailand yesterday drastically revised upward its headline and core inflation projections, while slightly lifting its economic-growth estimate for the year.

Headline inflation is now expected to surge to between 4 and 5 per cent this year, much higher than a previous assumption of just 2.8-4 per cent. (Nation)

Well, it’s good to be good, if I may say ;-). I wrote in october, that inflation in 2008 would be higher, because -partly- of a base effect.

And I wrote in february that the government’s forecast was wrong.

So I guess the BOT is reading ThaiCrisis… Or they eventually understood that it was difficult to continue to lie.

Mathematics do not lie : and since march, we know that 3,5 % for 2008 would be impossible…

So it’s a first good step. But I would like to emphasize that there is a risk that inflation rate could even be higher than 5 % for 2008.

And not only because oil prices for instance continue to go up (this is the tip of the iceberg) It’s what I call an inflation tsunami (read my article here) : when a lot of companies, simultaneously, have to increase their prices because they just can’t postpone anymore (themselves or forced by the government with prices controls).

Prices controls, subsidies are short term policies. They can’t solve the current problem.

And I don’t even speak about the… secondary effects. This is the real fear of central banks in the world… It’s when… wages are going up, to cope with prices… Adding gasoline onto the fire…

The risk is real in Thailand. Especially because the government, for political reasons, try to boost the GDP, by increasing public spendings (wages of civil servants too), cutting taxes, and implementing other “stimulus packages“, etc.

The wall is in front of us. And the government is just… speeding up…

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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.

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