Connect with us

Business

Phuket Business: The not-so-hidden cost of inflation

Legacy Phuket Gazette

Published

 on 

PHUKET: If you are an expatriate living in Thailand or considering relocating here, high inflation might be a distant memory from as far back as the late 1970s. However, Thailand has much higher rates of inflation than is seen in most developed countries, and you will need to consider that when you invest and prepare a budget for your Thai living expenses.

When I moved to Phuket in 2008 I did not expect to see such extreme rising prices. In 2008 I could find fresh coconuts at Tesco Lotus for 5 baht, now in 2013, 15 to 20 baht is the lowest I can find. While Phuket can still be less expensive than the US or Europe, prices continue to increase here at a rapid rate.

Understanding Thailand’s rate of inflation

The Ministry of Commerce, which calculates Thailand’s inflation rate, found that from 2000 until 2012, the annual rate has averaged 2.66%. However, during that period, inflation in the Kingdom has ranged from an all time high of 9.2% for the month of July 2008, to a record low of -4.4% in July 2009. Those all time highs and lows corresponded with political disturbances within Thailand as well as the impact of the global financial crisis on the country’s economy.

Back in December, inflation in Thailand also hit a 13-month high of 3.63%, in part due to minimum wage hikes along with the implementation of a diesel-tax subsidy to boost consumption after the 2011 floods hit the economy.

The diesel subsidy has since been extended until the end of January, plus there was another round of minimum wage increases at the start of the year. Moreover, such subsidies and wage hikes can vary from province to province – meaning accompanied price hikes leading to inflation would vary around the country.

Be aware of double standards

To further complicate matters for expatriates, Thailand is really two countries, one that is “first world” or well developed (areas like Bangkok, Phuket and Chiang Mai frequented by tourists where the local middle class is concentrated), and one that is much less developed.

The cost of maintaining a middle or upper class lifestyle in “first world” Thailand is not only rising because of large numbers of expatriates and retirees moving to the country, it’s also rising as more and more Thais join the ranks of the middle and upper classes as the economy grows.

That means expats living in Thailand who expect a high standard of living may have to contend with a rising cost of living that is much higher than the official inflation rates.

Finally, large numbers of tourists tend to visit Thailand at certain times of the year – usually after the rainy season ends in late November with their numbers peaking around the holidays and remaining high into the early months of the new year, before the weather gets too hot or wet again.

This annual high season brings about its own inflation as “foreigner” prices for accommodation, food, entertainment or transportation, in major tourism destinations such as Phuket, can rise significantly before falling back down when the high season ends.

Investment strategies for inflation

Given the above inflationary environment, many expatriates living in Thailand may find themselves in a situation where their living expenses are rising at a much higher rate than their net worth or cost of living adjustments to their pensions. Fortunately, there are investment strategies that can help your net worth keep pace with inflation.

For starters – and over the long term – investing in equities will usually be a better strategy for keeping pace with inflation than investing in fixed income investments or certificates of deposit in your home country. Moreover, large cap stocks with global operations that give them exposure to much higher growth rates in emerging markets could help your portfolio’s long-term returns.

Finally, Exchange Traded Funds (ETFs) not only offer investors a good way to invest directly in faster growing emerging markets, they usually come with much lower fees than mutual funds or the offshore investment products that are often marketed to expatriates.

After all, given how high Thailand’s average rate of inflation has been over the past decade, you will want to seek out investments with the lowest possible commissions and annual expenses to help ensure that their returns will keep pace with the rising cost of living in the country. In my opinion Thailand has the world’s best coconuts. Enjoy them while here but expect to pay more in the next few years due to inflation.

Don Freeman is president of Freeman Capital Management, a Registered Investment Advisor with the US Securities Exchange Commission (SEC), based in Phuket, Thailand.

He has over 15 years experience and provides personal financial planning and wealth management to expatriates. Specializing in UK and US pension transfers. Call 089-970-5795 or email: freemancapital@gmail.com.

— Don Freeman

 

Get more from The Thaiger

📱 Download our app on Android or iOS
👋 Have your say on our Thailand forums
🔔 Subscribe to our daily email newsletter
📺 Subscribe / Join YouTube for daily shows
👍 Like/Follow us on Facebook
🐦 FOLLOW us on Twitter
📷 FOLLOW us on Instagram

image

Join the conversation and have your say on Thailand news published on The Thaiger.

Thaiger Talk is our new Thaiger Community where you can join the discussion on everything happening in Thailand right now.

Please note that articles are not posted to the forum instantly and can take up to 20 min before being visible. Click for more information and the Thaiger Talk Guidelines.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

Follow Thaiger by email:

Thailand36 mins ago

“Fake news” banned, Thai media say order infringes on freedoms

Phuket46 mins ago

Precarious Phuket: open internationally, closed domestically

Best of1 hour ago

Top 5 tattoo parlours Bangkok

Sponsored1 day ago

Experience Phuket’s Islands with 5 Star Marine

Welcome back to Thailand!

Thaiger is getting behind local businesses for the restart of tourism in Thailand - up to 50% discounts across all advertising packages!

World1 hour ago

Duterte approves lockdown measures for Manila

Best of1 hour ago

The Best Pizza in Bangkok with Delivery

Thailand1 hour ago

Thailand News Today | worker camp woes, ‘fake news’ crackdown | July 30

image
Join the conversation on the Thaiger Talk forums today!
Best of2 hours ago

Best Premium Hotel Buffets in Bangkok

Coronavirus (Covid-19)2 hours ago

CCSA considers extending restrictions in “dark red” zones for another 14 days

Thailand2 hours ago

Fake dead bodies used in Phuket protest, police plan real investigation

Best of2 hours ago

Top 5 adventure tours in Chiang Mai

Best of2 hours ago

Top 5 affordable hotels in Chiang Mai

Coronavirus (Covid-19)4 hours ago

Friday Covid Update: 17,345 new cases; provincial totals

Thailand4 hours ago

Prayut offers his sympathies, teases restrictions

World5 hours ago

China’s national anthem possibly booed in Hong Kong, police investigate

Best of5 hours ago

Patong Beach’s 10 most popular hotels

Thailand5 months ago

Thailand News Today | Thai Airways in rehab, All go for Songkran | March 4

Tourism5 months ago

Phuket’s nightlife. Yes, bars and clubs are still open | VIDEO

Phuket5 months ago

Thailand News Today | Covid passport talks, Thai Airways heads to court | March 2

Tourism5 months ago

Phuket Thai food treats you need to try | VIDEO

Thailand5 months ago

Thailand News Today | Bars, pubs and restaurants ‘sort of’ back to normal | Feb 23

Tourism5 months ago

In search of Cat & Dog Cafés in Phuket Town | VIDEO

Thailand6 months ago

Thailand News Today | Gambling crackdown, Seafood market to reopen, Vlogger challenge | Jan 21

Thailand6 months ago

Thailand News Today | Covid testing for visas, Business impact, Vaccine approval | January 19

Thailand6 months ago

Thailand News Today | Weekend Bangkok bombs, Thailand fires, Covid update | January 18

Thailand7 months ago

Thailand News Today | Stray car on runway, Indonesian quake, 300 baht tourist fee | January 15

Thailand7 months ago

Thailand News Today | Governor off respirator, sex-trafficking arrest, condo prices falling | January 14

Thailand7 months ago

Thailand News Today | Chinese vaccine, Thailand ‘drug hub’, Covid update | January 13

Thailand7 months ago

Thailand News Today | Bangkok may ease restrictions, Phuket bar curfew, Vaccine roll out | January 12

Thailand7 months ago

Thailand News Today | Covid latest, Cockfights closed down, Bryde’s Whale beached | January 11

Thailand7 months ago

Thailand News Today | Southern floods, Face mask fines, Thai Air Asia woes | January 8

Trending