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Businesses pledgeto freeze prices
Bangkok Post – 14 August 2008
PHUSADEE ARUNMAS
Local manufacturers pledged yesterday to cap prices, particularly for essential daily-use goods, until year-end, leaving the government some breathing space from inflationary pressure.
Businesses making a total of about 10,000 products also promised to reduce some prices if their raw material costs declined in line with easing oil prices.
Boonchai Chokwatana, the chairman of Saha Pathanapibul Plc, the trading arm of the Saha Group, said any price increases for consumer products were unlikely if oil prices kept falling.
However, he said increases were possible for some products relying on imported raw materials such as chemicals or soybeans.
He made the comments at a meeting held by Commerce Minister Chaiya Sasomsab yesterday with executives of 10 leading manufacturers to discuss inflation and manufacturing costs.
Mr Chaiya said the ministry was increasingly confident that easing oil prices together with the government's six-month anti-inflation measures and the latest promise by manufacturers would help rein in the inflationary pressure.
He projected that inflation would move in a range of 7-8% for the full year. Headline inflation in July reached 9.2% annually with the rate in the first seven months averaging 6.6%.
Bank of Thailand deputy governor Atchana Waiquamdee said inflation in the second half would tend to be lower due to easing pressure from oil and food prices.
She declined to offer a projection, saying the central bank itself was not certain how long food and oil prices would continue falling.
Virabongsa Ramangura, a former finance minister and a chairman of a new economic advisory team to Prime Minister Samak Sundaravej, said appropriate rates for inflation and gross domestic product (GDP) growth should be 2-5% and 5% respectively.
According to Dr Virabongsa, regardless of the economic situation, macroeconomic management should take into account three key factors: GDP expansion, inflation, and external stability, namely of the baht, to maintain the trade and current account balances.
''To apply fiscal policy in handling the economy is like healing patients with traditional medicine,'' he said. ''It gives no side effects but its medicinal effect on patients is pretty slow.
''It's not like using monetary policy, which is comparable to strong modern medicine: the effect is rapid, but it often leads to side effects. Monetary policy may thus result in interruption to economic growth.''
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