Yingluck Shinawatra became Thailand’s first female prime minister by pledging to lift rural incomes through higher rice prices. The rest of Asia may now have to pay for her campaign promise, a Bloomberg report said.
Yingluck has said the government will buy unmilled grain from farmers at 15,000 baht a ton at harvest in November, above current market rates of 9,900 baht.
With Thailand the world’s biggest exporter, that may raise rice prices across a region that accounts for 87 percent of global consumption. The leader presented her economic policies to the Cabinet yesterday and is scheduled to announce them publicly by Aug 24.
Food makes up more than 30 percent of inflation indexes on average in Asia, according to Rabobank Groep NV. The weighting of rice in consumer-price indexes varies from 9.4 percent in the Philippines, 4.7 percent in Indonesia and 2.9 percent in Thailand, according to Bank of America.
The fondness for certain foods in Asian cuisine — from pork in China to onions in India and chilies in Indonesia — has left some of the region’s central banks grappling with the challenge of responding to surges in the cost of staples. A more varied diet and greater purchasing power for non-food items leave wealthier nations less vulnerable to food-cost gains.
Inflation in at least 10 Asian economies has risen above 10-year averages and has either breached or approached the upper end of official targets. Asian central banks have raised interest rates 44 times since March 2010 to contain inflation and the global uncertainty may keep them on hold “for a month or so,” according to DBS Group Holdings Ltd.
Rice, the staple food for about half of the global population, has surged about 55 percent in the past year according to futures traded on the Chicago Board of Trade. Global food prices remain close to the peak of 2008 and expected volatility in some commodity prices, such as oil, may boost prices in coming months, the World Bank said on Aug 15.
The export price of rice from Thailand has jumped 24 percent in the past year, to $567 per ton in the week ended Aug 3. That may rise to $700 by the end of December, according to the median estimate in a Bloomberg survey.
Yingluck’s Pheu Thai Party won 264 seats in the 500-member Parliament in the July 3 vote and formed a coalition that selected her as leader this month. The sister of deposed former ruler Thaksin said she plans to cut taxes, build rail lines, and give out free computers to students to boost economic growth.
Her party also promised to raise the daily minimum wage to 300 baht, almost double the current pay in some parts of the country.
The government’s policies will focus on boosting incomes and cutting costs, and the administration doesn’t “want to look only at inflation,” Yingluck said yesterday.
Finance Minister Thirachai Phuvanatnaranubala said this week he plans to meet with the central bank to discuss whether its inflation target may be an “obstacle” for policy implementation.
The Bank of Thailand has signaled it may raise borrowing costs further, saying the government’s spending makes the risk of inflation a greater concern than threats to economic growth. Inflation held above 4 percent for the fourth straight month in July on higher rice, pork, fuel and electricity prices.