Writer: Nuttawut Kulkaew

Editor: Wittaya Wonglor

Inflation is a decrease in the value of money. Prices rise for goods and services but income stays the same. Purchasing power plunges. The same amount of money buys less. Households have greater expenses. Business and industrial sectors have higher costs. Modest inflation of around 2%, however, can help the economy expand because money is circulating in the economy.

Inflation occurs through economic mechanisms and supply chains, such as higher prices based on consumer demand or production costs. There are other reasons. The Ukraine-Russia war, for example, hiked oil and natural gas prices across Europe, affecting food, transport, construction, and more. Interest rates are a primary strategy for the United States and over 80 other countries worldwide. Governments might print more banknotes to stimulate the economy. In the cases of Zimbabwe and Venezuela, too much money injected into the economy weakened the currency, triggering hyperinflation and almost collapsing the money system. People abandoned cash and turned to cows or cryptocurrencies. From the global financial situation, 80% of total domestic products worldwide are slowing. Global inflation will run at about 7.4% in 2022 and stay around 3.24-4.85% by 2027.

Thailand has relaxed its covid measures, resulting in the economy's recovery and expansion, with income from foreign tourism, private consumption, and the recovery of the service sector. The Bank of Thailand has formulated policies for long-term stable economic expansion. The policy interest rate of 0.25% per annum, from 0.75% to 1.00% per annum is not above expectation. The Thai economy is expected to grow by 3.3% in 2022 and 3.8% in 2023.

Individuals and households through the end of 2022 need to control and support the cost of living, including food, mobility, and consumer prices. Many organizations and educational institutions have decided to authorize personnel to return to work or spend more time at the office. This may bring additional expenses and entrepreneurs may increase prices. Consumers will turn to more eco-conscious behaviors, such as reusing containers, reducing plastic products, also to reduce costs. They may pack leftovers from breakfast or carry a bottle for refilling during the day instead of buying bottled water.

Big business’s borrowing costs remain conducive to fundraising, allowing them to grow. Examples of industries that may require special attention are the manufacturing and construction industries, including retail. Small and medium-sized enterprises (SMEs), especially those that are slow to recover from covid, may face multiple cost pressures from production costs and higher wages. Manufacturing of apparel and accessories, cosmetics, medicines, and herbal products could be hit. Investors need to keep an eye on the import-export industry, directly affected by the weak baht, including cryptocurrency speculation, considering the strong US dollar.

Looking through to July 2023, the Bank of Thailand expects the economy to continue to grow within the target range. But the volatile baht and rapid changes in technology and politics, especially in critical geopolitical areas, mean national policy and individual lifestyles might need to alter.

Implications for the future:

- Relevant regulators and financial institutions should continue accelerating debt restructuring measures, especially the issuance of targeted measures to sustainably address debt problems in vulnerable groups rather than financial aid measures and cost-cutting measures in the short term.

- The government should upgrade and increase labor skills, provide jobs according to capability, and issue policies to create sustainable income for low-income and vulnerable groups to narrow social inequality.

- Financial management skills in both traditional and digital finance systems should be one of the introductory core education courses to help young people cope with the economic surroundings that affect their lives.

- The study of the relationship between economics and politics should be emphasized more widely to highlight the relationship between the financial sector, law, politics, and international relations.

- People in Generations Z and Alpha will have a small percentage of their investment in traditional assets such as real estate, gold, or land. Instead, they expect growth opportunities and wealth from new assets and markets such as digital assets and income from economic activities on the metaverse platforms.

Reference:

- ข่าว ธปท. ​ฉบับที่ 50/2565 เรื่อง  ผลการประชุมคณะกรรมการนโยบายการเงิน ครั้งที่ 5/2565 https://www.bot.or.th/Thai/PressandSpeeches/Press/2022/Pages/n5065.aspx

- BOT Press Release No. 50/2022 Monetary Policy Committee’s Decision 5/2022 https://www.bot.or.th/English/PressandSpeeches/Press/2022/Pages/n5065.aspx

- BACK TO NORMAL ก้าวต่อไปนโยบายการเงินไทยภายใต้การฟื้นตัวของเศรษฐกิจ https://www.bot.or.th/Thai/BOTMagazine/Pages/256503108highlight.aspx

- กนง.ย้ำ การดำเนินนโยบายการเงิน ไม่เปลี่ยนเป้าหมายหลัก ไปคุม ‘ค่าเงินบาท’ https://www.bangkokbiznews.com/finance/investment/1029547

- “ซิมบับเว” ครองแชมป์ สุดยอดเงินเฟ้อ 231 ล้าน % https://www.moneyandbanking.co.th/magazine_detail/online_magazine/zimbabwe-inflation-champian-mb483-july2022-200765

- ภาวะเงินเฟ้อส่งผลกระทบกับเราอย่างไร https://thaipublica.org/2018/05/kkp-financial-literacy-16/

- ผลการสำรวจ SMEs ที่ได้รับผลกระทบจากสถานการณ์การแพร่ระบาดของโรคติดเชื้อไวรัสโคโรนา 2019 (COVID-19) https://www.sme.go.th/upload/mod_download/download-20210427095331.pdf

- What is inflation? https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-inflation

- Global inflation rate from 2017 to 2027(compared to previous year) https://www.statista.com/statistics/256598/global-inflation-rate-compared-to-previous-year/

- The state of the world's economies and markets in 2022 - in charts https://www.weforum.org/agenda/2022/09/world-economy-charts-2022

- Inflation To Be Elevated For Longer On War, Demand, Job Markets https://www.imf.org/en/Blogs/Articles/2022/04/27/blog-cotw-inflation-to-be-elevated-for-longer-on-war-demand-job-markets-042722

- Inflation Is Taking Hold Worldwide. Where Is It Hitting The Hardest? https://www.forbes.com/sites/qai/2022/09/28/inflation-is-taking-hold-worldwide-where-is-it-hitting-the-hardest/

- The world is at a point of significant economic danger, say experts https://www.weforum.org/agenda/2022/09/chief-economists-outlook-september-2022/

- https://www.youtube.com/watch?v=d8UL8UdcW38

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