Why are prices continuously rising? Understand the impact of inflation more deeply.

A few years ago, 50 baht could buy many bowls of rice, but today it only buys one. This is not because money has shrunk, but because inflation is happening all around us. The prices of oil, gas, chili, eggs, and other essentials are rising, causing the cost of living to soar and people’s wallets to leak.

The Impact of Inflation on Real Life: Expensive Goods, Cost of Living

When inflation comes, who benefits and who loses?

Deeper than just price adjustments is the change in purchasing power itself. Last year, pork cost 137.5 baht/kg; this year, it surged to 205 baht and then dropped to 133 baht. Fuel prices ranged from 28 to 40 baht/liter. Liquefied petroleum gas was 318 baht, now 393 baht. Utilities like electricity and water bills have also increased.

Who benefits from this situation? Merchants, entrepreneurs, shareholders, and banks — they can adjust prices and increase interest rates. But who loses? Consumers — because no matter how much their income increases, it always lags behind the rising prices.

Why does inflation occur? The 3 main causes to know

1. Demand > Supply (Demand Pull)
Post-COVID, everyone wanted to stay home and save money, not spending much. But once the economy reopened, money flooded out. As the economy recovers, demand for goods skyrockets, but factories and farms can’t keep up, giving sellers the right to raise prices.

2. Rising production costs (Cost Push)
High crude oil prices, transportation costs, chip shortages, and chaotic logistics mean producers pass these costs to consumers. They decide, “We can’t just absorb it; let’s raise prices.”

3. Insufficient money circulation (Printing Money)
When the government prints billions of banknotes, more money circulates than goods available. The result is a rapid increase in inflation rates.

Currently, the main causes are a combination of all three. Additionally, the Russia-Ukraine war and geopolitical tensions have severely disrupted food and energy supplies.

Inflation vs. Deflation: Different enemies of the economy

Many confuse inflation (rising prices) with deflation (falling prices), thinking deflation is good. But in reality, both are threats to the economy.

Inflation = rising prices. Beneficiaries are asset owners and those at the top. Losers are low-interest borrowers and fixed-income earners.

Deflation = falling prices. Sounds good, but it causes global hesitation to buy, business closures, unemployment, and economic stagnation.

The appropriate inflation rate in Thailand is usually 1-3% per year. When it exceeds 5%, it becomes problematic. In 2022, Thailand faced 7.10%, the highest since 1974.

360-degree effects of inflation: Citizens, businesses, economy

Impact on citizens’ wallets
Decreased purchasing power by 20% means that what used to buy 5 items now only buys 4. Bills for electricity, water, and food all increase.

Impact on entrepreneurs
While it seems they can raise prices, many small and medium businesses choose to go into debt because customers won’t pay more. Sales decline, costs rise, profits shrink, and they delay expansion, reduce staff, and cut training programs.

Impact on the overall economy
If inflation remains high, it can lead to “Stagflation” — high prices, high unemployment, and economic slowdown. This is a no-win situation. But raising interest rates is necessary; otherwise, hyperinflation could occur.

How to invest during inflation? 5 strategic categories

1. Banking stocks
Banks earn from interest rate spreads. When central banks raise rates, commercial banks’ margins increase, boosting profits.

2. Gold
Gold prices move in tandem with inflation. When inflation is high, gold prices tend to rise because it preserves value.

3. Real estate
Rents increase with inflation. Real estate doesn’t fluctuate with stock markets, making it suitable for those with substantial funds seeking steady returns.

4. Floating Rate Bonds
Interest rates on these bonds adjust according to inflation. Inflation-linked bonds are especially attractive now.

5. Food stocks and accumulation assets
Global food shortages, rising prices, and people’s need to eat and consume make these stocks advantageous, with pricing power.

What to do in the meantime?

Plan investments firmly — low-interest savings earn very little, so seek assets that outperform inflation.

Reduce debt — with rising interest rates, existing debts become more expensive.

Pause and think before spending — buy only essentials, avoid unnecessary expenses.

Follow economic news — inflation influences policy decisions, stock movements, and cryptocurrency prices.

Summary: Inflation is not trivial; it requires smart management

Thailand has long-standing financial institutions capable of control, but in 2022, the Consumer Price Index rose to 7.10% compared to 2021, indicating an abnormal situation. Investors who are unprepared may see profits slip away.

Why should we care about inflation’s impact?

Because if our money isn’t invested to grow, it will shrink unnoticed. Customers doing nothing but saving 1-2% in bank deposits annually face inflation of 5-7%, gradually losing purchasing power day by day.

That’s why citizens must understand inflation’s effects and choose smart investments—whether stocks, gold, real estate, or digital assets—to keep their money’s value stable or growing.