Inflation is coming. Investors need to know these to protect their profits.

This article will help you understand how inflation impacts your investments and how investors should act to minimize the risk of loss.

What is inflation? Explained Simply

Inflation is the continuous rise in the prices of goods and services. From a monetary perspective, it means the value of money decreases over time. As a result, you need to pay more money to buy the same item.

For example: 10 years ago, 50 baht could buy several plates of rice, but today it only buys one. Looking 30 years ahead, a single plate of rice might cost 100 baht.

Who benefits and who loses in an inflationary era

Beneficiaries:

• Entrepreneurs and merchants (can raise prices)
• Shareholders and banks (interest rates increase)
• Gold holders and asset owners

Losers:

• Salary earners (whose wages increase slower than inflation)
• Cash savers (whose money loses value)
• Creditors (who receive less valuable repayments)

Why does inflation occur?

Main causes:

1. Demand Pull Inflation - Consumers want to buy more, but supply is limited, so sellers raise prices.
2. Cost Push Inflation - Production costs increase, such as oil, gas, steel, leading producers to raise prices.
3. Printing Money Inflation - The government prints more money, resulting in excess money supply.

Current situation: The global economy is recovering post-COVID, but supply chain issues (Supply Chain), energy and metal prices are rising, increasing production costs and causing inflation to spread worldwide.

The dangers of Stagflation faced by countries

Stagflation is an economic condition characterized by high inflation combined with slow or no economic growth. If Thailand’s economy enters this phase:

• People buy less
• Entrepreneurs earn less
• Businesses halt expansion and lay off staff
• Unemployment rises
• GDP growth stalls

Currently, Thailand’s economy has not fully entered stagflation, but warning signs are evident. Therefore, preparation is crucial.

How inflation affects daily life and investments

###Impact on wallets

Living costs are clearly rising. Examples of essential goods prices:

Everyone has to pay more for the same goods.

###Impact on entrepreneurs

When prices rise, consumers buy less, sales decline, higher costs mean lower profits or losses → leading to reduced investments and layoffs.

###Impact on the country

Economic development stalls, long-term productive capacity decreases, financial system becomes imbalanced, and household debt problems arise.

How does inflation differ from deflation?

Inflation: Prices rise, economy expands, money loses value.

Deflation: Prices fall, economy stagnates, people are reluctant to spend money.

Both extremes are equally dangerous for the economy.

How to measure inflation

Every month, the Ministry of Commerce collects data on 430 items to calculate the Consumer Price Index (CPI).

Data for January 2024:

• CPI = 110.3 (Base year 2019 = 100)
• General inflation (Year-on-Year) = decreased by 1.11%
• Month-on-Month inflation (Month-on-Month) = increased by 0.02%

Prices have decreased due to lower energy and fresh food prices, but the comparison base is higher than previous years.

Who benefits from inflation?

Advantages:

• Entrepreneurs expand their businesses and hire more
• The economy grows, and people’s incomes increase
• Money circulates more in the system

Disadvantages:

• Excessive inflation → consumers buy less → producers sell less → layoffs
• Purchasing power of money declines
• Cash savers lose value
• The financial system becomes unstable

How to invest during inflation

1. High-interest deposits

Fixed deposits for 12-36 months offer returns higher than regular savings, but may still be below inflation rate.

2. Real estate funds

Rental income adjusts with inflation, less volatile than stock markets, suitable for long-term investors with surplus funds.

3. Inflation-adjusted bonds

• Floating Rate Bonds: Interest rates adjust according to market conditions.
• Inflation-Linked Bonds: Both interest and principal adjust with inflation.

Reduces risk from falling interest rates.

4. Gold

Price tends to rise with inflation. A stable, long-term asset that can also be traded for profit.

• Buy physical gold (as a store of value)
• Trade CFD gold (for bullish or bearish speculation)

5. Stocks benefiting from inflation

Bank stocks

• Earn from higher interest spreads (Spread)
• When the central bank raises interest rates → commercial banks profit more

Insurance stocks

• Invest in government bonds with returns linked to inflation
• Premium rates can be increased accordingly

Food stocks

• Essential goods, consumers must buy
• Have pricing power

How to prepare for inflation - Practical tips

1. Plan your investments - Shift funds from savings to assets with higher returns.
2. Avoid bad debt - Reduce borrowing, as inflation decreases repayment power.
3. Avoid holding large amounts of cash - It loses value; choose assets that appreciate.
4. Stay informed - Understand current events to adapt timely.

Real example: Companies profiting from inflation

PTT Public Company Limited (PTT) in the first half of 2022, when oil prices surged:

• Total revenue: 1,685,419 million THB
• Net profit: 64,419 million THB (up 12.7% YoY)
• 24% from PTT and 76% from group companies

This example shows that some companies can expand profits during inflation if investors choose the right stocks.

Summary: Inflation is not the enemy if you know how to manage it

Inflation is a normal economic phenomenon. At moderate levels, it helps economic growth. However, if the effects of inflation intensify, it can lead to Hyperinflation and Stagflation.

Investors should do the following:

• Track CPI inflation monthly
• Adjust their investment portfolios to hedge against inflation
• Choose assets that move with inflation
• Generate additional income, regardless of how much

Inflation will come, but those who prepare will not suffer losses—they will profit instead.