Inflation and deflation: What investors should know

2025-12-24 19:28:47

Why Does Inflation Persist?

Currently, inflation is a topic no one talks about anymore. Whether eating, watching the news, or riding a taxi, prices are rising everywhere, making our wallets feel “worthless.” But in reality, inflation is a necessary part of the economic system. Think about it: if prices remained the same for 30 years, that would mean the economy isn’t growing.

What is (Inflation)?

Inflation is the phenomenon where the general prices of goods and services continuously increase. From another perspective, the value of money is shrinking. Simply put, 50 baht used to buy many bowls of rice, but now it only buys one.

An example is PTT Public Company Limited, a major oil and gas company. In the first half of the year, they earned 1,685,419 million baht with a net profit of 64,419 million baht, an increase of 12.7% compared to the previous year, due to soaring oil prices.

( Who benefits from inflation?

Merchants and entrepreneurs: Can raise prices at will
Shareholders and investors: Business profits increase, stock prices rise
Debtors: Debt gradually “lightens” as the value of money decreases

But for salaried workers? Sorry, wages don’t increase as fast as inflation.

Where does inflation come from?

) The three main causes

1. Demand-pull inflation ###Demand Pull Inflation###
Consumers want to buy, but goods are insufficient, so prices must go up.

2. Cost-push inflation (Cost Push Inflation)
Rising costs of oil, wages, and transportation force producers to raise prices.

3. Excessive money printing (Printing Money Inflation)
Too much money circulating in the system causes the currency to depreciate.

( But what is really causing global inflation now?

The global economy is trying to recover from COVID-19, driven by government and private sector spending. However, the problem is supply chain disruptions, such as container shortages, electronic chip shortages, or soaring crude oil prices due to geopolitical issues.

According to IMF data from January 2024, the global economy is projected to grow by 3.1% in 2024 and 3.2% in 2025, despite many challenges.

Thailand and Inflation

Thailand’s Consumer Price Index )CPI### in January 2024 was 110.3, up 0.3% from the previous year. Compared to the same month in 2023, actual inflation decreased by 1.11%, marking the fourth consecutive month of decline.

Why did it decrease?

Energy prices dropped due to government measures to reduce energy costs
Fresh vegetables and meat prices fell as production increased in the market
Last year’s base prices (October 2022 - January 2023) were very low

However, everyday goods like red pork, fresh chicken, and fish remain at higher-than-normal levels.

( Major Threat: Stagflation

If Thailand enters a Stagflation )high inflation but stagnant economy###, it would be an undesirable scenario. People buy less, businesses sell less, layoffs increase, unemployment rises, and GDP contracts—truly dangerous.

Benefits and Problems of Inflation

( Advantages
✅ Business expansion - Shop owners can buy at higher prices, invest more, and hire more
✅ Reduce unemployment - Increased demand for goods requires more hiring

) Disadvantages
❌ Rising prices - Reduced purchasing power, lower sales
❌ Student debt - Increased poverty, everything costs more, hitting wallets hard

Inflation vs. Deflation: What’s the Difference?

	Inflation	Deflation
Definition	Rising prices of goods	Falling prices of goods
Cause	High demand, high costs	Low demand, insufficient circulation
Impact	Reduced purchasing power	Economic slowdown, no investment

Both, if severe and prolonged, can harm the economy and people’s lives.

How to Adapt When Inflation Comes?

1. Invest instead of saving in banks

Interest rates on deposits are low. Consider investing in stocks, funds, or bonds that offer higher returns.

2. Avoid bad debts

If borrowing at unfavorable rates, debt becomes “heavier” relative to your purchasing power. Think carefully before buying.

3. Invest in stable assets

Gold - Prices tend to rise with inflation, safest hedge
Real estate - Rental income increases with inflation
Insurance stocks - Investing in government bonds yields higher returns
Floating Rate Bonds - Adjust interest according to inflation

4. Which stocks are good?

Bank stocks

When interest rates rise, banks profit from higher interest margins

Food stocks

Everyone needs to eat, regardless of purchasing power, so demand remains
Food producers can raise prices

Energy stocks

Rising oil prices boost profits

5. Follow daily news

Inflation fluctuates. Staying informed gives you a big advantage.

Summary: Surviving Inflation

Inflation is not an enemy, but it’s also not a friend. When inflation is at an appropriate level ###2-3%###, the economy can grow healthily. But if inflation spikes too high or turns into Hyperinflation, it causes chaos for the country.

Smart investors don’t fight the trend blindly but “invest with inflation” by choosing assets that benefit directly, whether stocks, gold, real estate, or inflation-adjusted bonds.

Most importantly: Follow the news, stay calm, and be prepared.

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