## What is Inflation? Why Do Investors Need to Understand It

If you notice that the money in your wallet buys fewer goods than before, you are experiencing **inflation**, an economic phenomenon where the prices of goods and services tend to rise continuously. In other words, inflation is a decrease in the value of money, requiring more money to purchase the same items.

### Clear Example

Mr. A has 50 baht, which can buy several bowls of rice. But after one year, rice prices have increased, and Mr. A can only buy one bowl with his original money. Going back 10 years, a bowl of rice might have cost 100 baht.

Rising inflation significantly impacts investment decisions in the stock market because it indicates whether the economy is growing or slowing down.

## Who Benefits and Who Loses from Inflation?

**Beneficiaries:** Entrepreneurs, traders, and those with incomes that can be adjusted according to the market, as they can raise prices without difficulty.

**Losers:** Salaried employees, because salary increases are often less than the inflation rate, reducing their purchasing power each year.

## What Causes Inflation?

Current inflation levels are mainly due to three factors:

**1. Demand Pull Inflation** - Consumers want to buy more goods due to the global economic recovery, but supply is insufficient, so sellers raise prices.

**2. Cost Push Inflation** - Production costs increase due to higher energy prices, raw materials, and supply chain issues, forcing producers to raise prices.

**3. Printing Money Inflation** - The government injects more money into the economy, leading to excess money supply and sharp price increases.

Additionally, wars and geopolitical tensions push up oil and natural gas prices. For example, the Russia-Ukraine war caused Thailand’s inflation rate to reach 7.10% in May 2022.

## Current Thai Inflation Situation

As of January 2567, the Consumer Price Index (CPI) (CPI) is at 110.3, up 0.3% from the previous year. The overall inflation rate has decreased to 1.11%, the lowest in 35 months.

This decline is due to reductions in energy, fresh vegetables, and meat prices. However, the Thai economy is facing **Stagflation** (a situation where the economy slows down while inflation remains high), an undesirable scenario.

## Changes in Basic Goods Prices – See for Yourself

| Product | 2564 | 2565 | 2566 | 2567 |
|---------|-------|-------|-------|-------|
| Pork | 137.5 THB/kg | 205 THB/kg | 125 THB/kg | 133.31 THB/kg |
| Chicken | 67.5 THB/kg | 105 THB/kg | 80 THB/kg | 80 THB/kg |
| Eggs | 4.45 THB/egg | 5 THB/egg | 3.83-4 THB/egg | 3.9 THB/egg |
| Chili | 45 THB/kg | 185 THB/kg | 200 THB/kg | 50-250 THB/kg |
| Diesel Oil | 28.29 THB/liter | 34.94 THB/liter | 33.44 THB/liter | 40.24 THB/liter |
| Gasohol | 28.75 THB/liter | 37.15 THB/liter | 35.08 THB/liter | 39.15 THB/liter |

You can see that the impact varies each year, whether it's meat, energy, or vegetables. The everyday products we use are becoming more expensive.

## How Does Inflation Affect Us?

**For Consumers:** Cost of living rises, purchasing power decreases, and the same salary buys fewer goods.

**For Entrepreneurs:** Sales decline, costs increase, leading to reduced investment and layoffs.

**For the Country:** Economic development slows, people speculate in risky assets, and bubbles may form.

## How Is Inflation Different from Deflation?

**Inflation** = Continuous increase in prices, with the economy tending to grow.

**Deflation** = Continuous decrease in prices, with the economy stagnating.

Both, when severe, can harm the population equally.

## What Should Investors Do?

### **1. Plan investments wisely**
Low deposit interest rates suggest investing in higher-yield assets such as stocks, funds, or real estate.

### **2. Avoid unnecessary debt**
Practice disciplined spending; do not buy things you don't need.

### **3. Invest in stable assets**
Gold is a good choice because it maintains value and appreciates with inflation.

### **4. Invest in benefiting sectors**

**Bank stocks:** Benefit from increased interest margins.

**Insurance stocks:** Invest in government bonds that offer high returns aligned with inflation.

**Food stocks:** Essential products that people will buy regardless, with pricing power.

### **5. Consider Floating Rate Bonds**
Interest rates adjust according to inflation, helping to hedge against inflation.

### **6. Follow economic news**
Investment decisions should be based on CPI data and central bank policies.

## Example of Profit from Inflation

PTT Public Company Limited (has benefited greatly from rising oil prices. In the first half of 2565, it earned 1,685,419 million baht with a net profit of 64,419 million baht, a 12.7% growth compared to the previous year. This shows how some companies can "speculate" profitably during inflation.

## Pros and Cons of Inflation

) Advantages ✅
- Business owners can raise prices, increase profits, and expand operations.
- Employment increases, and the economy grows.
- Unemployment rates decrease.

### Disadvantages ❌
- Prices rise rapidly, leading to decreased purchasing.
- Producers sell less, profits decline, and layoffs occur.
- **Hyper Inflation** ###severe inflation( causes economic collapse.
- Money loses value; if money is saved without investing, it will be eroded.

## Summary: What You Should Know About Inflation

**Inflation** results from increased demand, higher production costs, and global economic conditions. When inflation is at a moderate level, the economy grows. But if it becomes too high, it leads to **Hyper Inflation**, which is dangerous.

Investors can profit from inflation by investing in sectors that benefit, gold, or bonds with interest rates adjusted for inflation.

Unlike deflation, where prices fall and the economy stagnates, moderate inflation is a healthy circulation of money. However, always keep an eye on economic news to avoid missing changes that affect investments and daily life.