Stagflation : the economic nightmare we don’t want to face

Stagflation refers to a state of an economy, where there are continually high rates of inflation; causing people to have less purchasing power, be responsible for higher living costs, and eventually households decide to cut down on their spendings. When this happens, the sales of businesses and SMEs are tragically affected. As the revenues shrink and losses incur, staff layoffs become an inevitable aftershock.  Laid-off workers would be left without an income, and subsequently the aggregate consumption would come to stagnation. It is a vicious loop that is difficult to pacify. Money exchange between producers and consumers are at the core of any economy, and disturbances of it can lead to a pitfall.    

stagflation

According to Bank of Thailand’s observation, Thailand is not yet to face real stagflation anytime soon, due to the expectation of growth coming in 2022 and 2023, at 3.2% and 4.4% respectively following the rebounce of supply from the tourism section. As the Test and Go policy becomes more relaxed over time, prospectively more travelers will come to Thailand and bring inflows of money into the Thai economy.

The inflation rate of the year 2022 is expected to be 4.9%, surpassing its original prediction. Hence, the Bank of Thailand will continue its 0.50% annual interest rate policy to promote the recovery of economic activities in this year.

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stagflation