Getting more expensive every day? Do you truly understand inflation or are you just happy about it?

When January 2567 arrives, prices of various goods in Thailand have changed significantly. If you observe the prices of meat, leisure, or fuel, you’ll see that our purchasing power is trending downward. Managing finances during inflation is an essential aspect that investors should not overlook.

Inflation (Inflation) How It Affects Our Lives

In reality, inflation is not just a number that economists talk about in the news; it is something we experience daily when buying goods, saving money, and planning for the future.

As the prices of goods and services tend to rise continuously, the value of our money gradually decreases. Simply put, inflation means things become more expensive; a ten-thousand-dollar bill that bought many items before now only buys a few.

If you had 50 baht twenty years ago, you could buy several bowls of rice. Today, the same 50 baht only buys one bowl. And in ten years, you might need 100 baht to buy a bowl of rice. That is the power of inflation.

Why Do Prices Keep Rising? What Is the Real Cause?

The global economy recovers from crises, people increase spending, and money flows into the market extensively. However, production cannot keep up with demand. This is called Demand Pull Inflation—more demand than supply, causing sellers to stop lowering prices to sell more.

Supply Chain Disruption (Supply Chain Disruption) after COVID-19 has had a significant impact—container shortages, scarce semiconductor chips, rising transportation costs. Producers must bear higher costs and cannot avoid raising prices. This is known as Cost Push Inflation.

The Russia-Ukraine war caused crude oil and natural gas prices to soar rapidly. Thailand’s inflation rate in May 2565 (2022) exceeded 7.10 percent.

Last year, Thailand’s inflation rate decreased for the fourth consecutive month to 1.11 percent (YoY) in January 2567, the lowest in 35 months, due to government energy price controls and increased agricultural output. However, this does not mean inflation has disappeared; risks from stagflation still need to be monitored.

Who Benefits from Inflation, Who Loses?

Beneficiaries:

• Retail entrepreneurs who can adjust prices according to demand
• Business owners expanding and hiring more staff
• Shareholders in banks and insurance companies profiting from interest margins
• Lenders calculating loans at reduced values

For example, PTT’s net profit in the first half of 2566 (2023) was 64,419 million baht, an increase of 12.7% year-over-year, due to soaring oil prices.

Those Who Lose:

• Salaried employees, as wages increase slower than inflation
• General consumers, facing higher living costs with stagnant income
• Cash savers, as the value of their money declines

The Numbers Reveal the Truth About Thai Prices

Prices of goods in Thailand over the past 4 years:

Fresh vegetables and meat are the most volatile due to weather and transportation factors.

Inflation vs. Deflation: What’s the Difference?

Inflation = Rising prices, decreasing money value, benefiting sellers.

Deflation = Falling prices, increasing money value, harming sellers, indicating economic downturn.

Both situations, if severe and prolonged, can cause harm to the public. Imagine stagflation (High inflation but no economic growth)—a scenario nobody wants to see.

Global Economic Expansion Remains Slow Despite Falling Inflation

According to the IMF January 2567 (2024) report, the global economy is expected to grow 3.1% in 2567 and 3.2% in 2568, slightly above previous forecasts but still below historical averages.

Reasons include:

• Central banks’ monetary policies remain tight, not easing
• Government financial support has waned
• Productivity growth is below expectations
• Geopolitical tensions continue to pose risks

For Thailand, the economy has not yet entered stagflation, but challenges remain. Policymakers must balance controlling inflation and promoting growth.

What Should Investors Do When Inflation Occurs?

1. Develop a visionary investment plan

With low deposit interest rates, it’s necessary to invest in assets offering higher returns, such as stocks, mutual funds, or digital assets.

2. Choose inflation-hedging assets

Gold – Moves in tandem with inflation; the higher the inflation, the more expensive gold becomes. Inflation-linked bonds – Floating Rate Bonds or Inflation-Linked Bonds adjust interest rates according to inflation. Real estate – Rents increase with inflation, providing stable income.

3. Invest in stocks benefiting from inflation

• Bank stocks – Rising interest rates increase profit margins
• Insurance stocks – Premiums invested in bonds yield higher returns
• Food and energy stocks – Essential goods that price up with inflation, giving pricing power

4. Avoid unproductive debt

Debt that does not generate income or assets, when inflation is high, reduces the real value of your debt. Whether this is beneficial depends on how you manage it.

5. Keep up with news regularly

Consumer Price Index (CPI) releases monthly; central bank policies, IMF economic outlooks—all help you plan better.

Final Words: Is Inflation a Friend or Foe?

Moderate inflation (around 2-3% per year) signals a growing economy, expanding businesses, and employment.

Excessive inflation (above 5%) or Hyperinflation destroys wealth accumulation and life stability.

Smart investors do not run from inflation but learn to use it to their advantage by investing in assets that can hedge against or profit from such situations. Remember, knowledge and proactive planning are key to financial security.