Thailand inflation to hit 3.6%

Blame it on the minimum wage hike.

According to DBS, headline inflation is expected to reach 3.6% YoY in January, unchanged from December. This number will be keenly watched as the datapoint will reflect the increase in daily minimum wage to THB 300/day across all provinces.

In the previous minimum wage increase in April last year, price increases were muted due to a combination of factors including administrative controls on selected goods prices, stable oil prices and a hefty tax cut to corporates.

Here's more from DBS:

It remains to be seen if the government’s measures to help firms cope with increased manpower costs will be as effective this time round. In the short term, inflation is likely to stay muted.

Notably, not all sectors of the economy are doing well. Electronics, for example, appears to be lagging even as the autos sector has been performing.

Nonetheless, external demand is expected to pick up in the coming months and this will exert some demand-pull pressures on prices. Over the medium term, the construction of infrastructure projects will also contribute to inflation.