Inflation not a problem for Thailand

Thanks to price controls that the authorities have put in place.

DBS Group Research noted:

Inflation is expected to remain stable, reaching 3.4% YoY in November. Inflation has not been a problem for 2012 despite high food prices and hikes in minimum wages in the early part of the year. This can be attributed to price controls that the authorities have put in place.

In fact, the component that is going to pose the largest price jump in YoY terms will be the tobacco & alcoholic beverages as taxes on these items have recently been increased. Going forward, the rollout of higher minimum wages across the remaining 70 provinces in 2013 is likely to add to price pressures.

On the demand side, consumers will have more purchasing power, while on the supply side, firms may be forced to mark up prices to deal with rising costs. A lot will depend on upcoming government measures to help defray costs for companies. Domestic consumption looks set to be well-supported in 2013.

Ongoing pro-growth policies (such as the rice-pledging scheme) and the ramp up on infrastructure spending by the government will also contribute to demand-pull inflation.