External factors have held greater sway in moving Thailand's headline inflation, with globalisation having a significant impact on inflation's trajectory, says an economic researcher.
Internal factors such as domestic demand and supply-side contributions to inflation have constantly diminished and hit almost zero correlation during the 2008-15 period, said Pym Manopimoke, a senior researcher at the Puey Ungphakorn Institute for Economic Research (PIER), citing a study entitled "Thai Inflation Dynamics in a Globalised Economy".
The study aims to identify factors affecting low and stable inflation since Thailand adopted an inflation-targeting policy in 2000.
Meanwhile, external factors are playing a larger role in determining the inflation rate as a result of globalisation, contributing to greater trade between Thailand and the rest of the world, Ms Pym said.
Besides commodity prices, she said external factors also involve indirect elements such as free trade between countries and free movement of raw materials.
"These indirect factors help increase the competition in a country that imports cheaper goods and raw materials, resulting in a lower price of goods in that country," said Ms Pym.
The study showed that Thailand's persistent low inflation in recent years has not been merely due to low oil prices, but was also attributed to greater connectivity through globalisation starting from 2000, which has resulted in more correlation with external factors, she said.
"As a result, in an era of the globalisation, Thailand could still experience low inflation for longer periods even if oil prices recover in the future," the study said.
Ms Pym said central banks in many countries have implemented quantitative easing measures but their attempts to increase stubborn inflation have been muted.
"Economists might have to reconsider the factors affecting inflation. In a more-connected world, low inflation caused by more efficient production and more competition might not always be bad news," said Ms Pym.
Thailand's annual headline consumer price index (CPI) rose for a fourth straight month in July, the Commerce Ministry reported.
The headline CPI edged up 0.1% in July from a year earlier after rising 0.38% in June
The central bank forecasts annual headline and core inflation to rise by 0.6% and 0.8% this year, respectively.