Thailand's inflation to edge down to 3%

In fact, inflation isn't much of a problem.

Accroding to DBS, our inflation forecasts have been nudged lower to 3% (from 3.2% previously) and 3.6% (from 3.7% previously) for 2012 and 2013 respectively.

Here's more from DBS:

For the most part of 2012, inflation has not been a problem despite elevated food prices and hikes in minimum wages in the early part of this year.

This is due in part to price controls and a sizable corporate tax cuts that have helped to limit the higher cost pass-through to final goods and services. More recently, a further easing of food prices have helped to pull inflation down to just 2.7% YoY in November.

However, price pressures are likely to build in the coming quarters, translating into higher inflation. The rollout of higher minimum wages across the remaining 70 provinces in 2013 is likely to add to price pressures as consumption gets a boost.

On the supply side, firms will have to deal with higher costs and a lot will depend on upcoming government measures to help reduce the impact. Monetary tightening is only expected towards the end of 2013.