Siripol Yodmuangcharoen, the Commerce Ministry's permanent secretary, said the forecasts used a Dubai oil price assumption of US$85 a barrel, up from $68 for 2007. The ministry also used average retail prices of between 30.50 and 31.85 baht a litre for premium petrol and 27.67 to 28.52 baht for diesel.

The forecast also assumes an exchange rate of 33-34 baht against the US dollar, and increased cooking gas prices as the government ended subsidies for consumers early this month.

The increasing inflation rate would not affect consumers much, considering that economic growth is projected at 4.5% to 5% next year, Mr Siripol said.

In the first 11 months of this year, headline inflation, which includes volatile food and energy prices, was 2.2.% over the same period of 2006. Inflation in November alone rose by 3% year-on-year due mainly to fuel prices; it was up 0.4% from the previous month.

Core inflation, which excludes food and energy prices, was 1.1% year-on-year and up 0.1% from October.

Nipon Poapongsakorn, dean of Economics at Thammasat University, said that rising farm prices, in particular those of soybeans, maize and palm oil, would contribute to higher inflation in 2008. Palm oil in particular is in heavy demand to make biodiesel.

Meanwhile, Commerce Minister Krirk-krai Jirapaet has asked food vendors to raise prices to reflect real costs, not to take profits. A price of 20.50 baht was reasonable given higher costs, he said.