I just saw people talking about Stagflation—the situation where the economy slows down but prices rise at the same time. It sounds like this could be something Thailand might face in the future. Let’s take a closer look at what stagflation really is, and how close we are to it.

To understand it more easily, stagflation comes from two words: Stagnation (economic slowdown) and Inflation (rising prices). That means when the economy doesn’t expand, unemployment increases, but the prices of goods still go up—an abnormal situation that’s difficult to solve.

In the 1970s, the United States actually experienced this. Oil prices surged due to the Middle East crisis, causing inflation to break through 10%, while the unemployment rate was also close to 10%. It took three people to replace the central bank executives before Paul Volcker came in and decided to raise interest rates to 18% to curb prices. The result was a severe economic downturn, and even saw recession happen twice within one year. Even Latin America was affected to the point of nearly going bankrupt.

Let’s look at Thailand’s case. Right now, we have 3 signals to monitor. First, Thailand’s GDP is expected to grow by 3.0 to 3.7% in 2566, supported by a recovery in tourism. The number of foreign tourists is estimated at about 20 to 25 million, and domestic consumption has also improved. Second, Thailand’s unemployment rate is likely to decline. It is currently 1.23%, which is not at a crisis level. Third, general inflation in February 2566 was 3.79% YoY—high, but showing signs of slowing down.

When you combine these three factors, stagflation is still far from Thailand at the moment, because the economy still has support from consumption and tourism. Even though inflation is high, there are signs it will ease around mid-year.

But that doesn’t mean we are completely safe. The risks that could lead to stagflation include ongoing rising costs—especially electricity costs—risks from a slowdown in the global economy, and high household debt. If interest rates need to keep rising, it could cause consumers to pull back.

If we talk about investment strategies in this kind of environment, investors should look for assets that benefit from inflation, such as gold, commodities, real estate, and cyclical stocks. Gold, in particular, is widely recognized as a good hedge against inflation because its price tends to move in the same direction as inflation rates.

In summary, even though stagflation is not close to Thailand right now, risks still exist. The government and the Bank of Thailand need to address the issues of costs and inflation, otherwise the economy could face long-term problems. As investors, we should prepare our portfolios to be ready to handle various situations starting from now.