The Bank of Thailand (BoT) skyrocketed its inflation rate forecast for this year to 4.9% from 1.7% because of energy and food price surges attributed to supply shock from the Russia-Ukraine war.
Headline inflation is projected to be 4.9% in 2022, higher than the central bank's inflation targeting range of 1-3%.
The bank assesses the headline inflation rate will tally 1.7% next year, a slight increase from an earlier estimate of 1.4%, said Piti Disyatat, secretary of the central bank's Monetary Policy Committee (MPC).
The BoT also cut its 2022 GDP growth forecast from 3.4% to 3.2% and slashed the 2023 projection from 4.7% to 4.4%.
The MPC meeting on Wednesday decided to maintain the policy rate at the existing level of 0.5%.
"Inflation will exceed 5% in the second and third quarters this year, driven mainly by rising energy prices and the pass-through of food prices," Mr Piti said.
However, inflation is projected to drop and return to the target range in 2023, owing in part to the assessment that the rise in energy prices will not persist, said the MPC. Upside risks to inflation remain, primarily from higher-than-expected oil prices and cost pass-through from producers to consumers. The MPC believes the rise in inflation has been mainly due to cost-push factors, he said.
The short-term outlook for one year has the inflation rate continuing to increase, but it should decline for the medium to long term, over the next three to five years, said Mr Piti.
The central bank predicts an average Dubai crude oil price of US$100 per barrel this year, jumping from an earlier forecast of US$68.3 per barrel. The oil price is expected to fall to $90 per barrel in 2023, up from a previous projection of $69.5 per barrel.