Australian non tax resident- non-financial issues.

[chiang mai]

Am I alone in seeing high inflation in Thailand in the near future? An increase in the minimum wage, increased wage bands for many government workers and an exodus of Burmese workers back to their homeland all seem to indicate that wage inflation is on the increase and will negatively impact the Thai economy going forward.

Will Thai manufacturers/producers hire more nationals, seems like there is little alternative, will they also pass on their increased costs to the consumers, almost certainly. And how will the BOT respond, a weaker baht or increased interest rates, the former will make imports more expensive an interest rate hike will constrain business. I'm no expert on any of this but I can't help but see a problem looming and wonder what the economists in our midst think.

[phomsanuk]

Probably, 4% inflation, 6% growth, still better than most of the west.

[JohnnyGray]

Thailand’s economy is getting back on its feet after the disastrous floods.The government is stepping up public borrowing and expenditure on reconstruction and disaster relief, which has introduced inflationary pressure.

But the Baht is still strong against a basket of currencies, making imports less expensive, which suggests the markets thinks that Thailand will recover relatively undamaged. Increasing oil prices remain the main threat to the economy and will drive inflation in the near-term.

Developments in Burma/Myanmar threaten to take a share of unskilled workers and investment away from Thailand.

Thailand needs to press on with its initiatives for the workforce in education and vocational training to develop its service industries. It's no longer a low-cost country for manufacturing.

[givenall]

Probably, 4% inflation, 6% growth, still better than most of the west.

Your inflation number is off by factor of 2. I see everything going up by more than 10%, including some cars, food, services. Energy etc. etc.

[chiang mai]

Thailand’s economy is getting back on its feet after the disastrous floods.The government is stepping up public borrowing and expenditure on reconstruction and disaster relief, which has introduced inflationary pressure.

But the Baht is still strong against a basket of currencies, making imports less expensive, which suggests the markets thinks that Thailand will recover relatively undamaged. Increasing oil prices remain the main threat to the economy and will drive inflation in the near-term.

Developments in Burma/Myanmar threaten to take a share of unskilled workers and investment away from Thailand.

Thailand needs to press on with its initiatives for the workforce in education and vocational training to develop its service industries. It's no longer a low-cost country for manufacturing.

Strength of the Baht is almost exclusively a function of the BOT and not markets, the currency is not traded as such on markets and is too small anyway in global terms.

[chiang mai]

Probably, 4% inflation, 6% growth, still better than most of the west.

Your inflation number is off by factor of 2. I see everything going up by more than 10%, including some cars, food, services. Energy etc. etc.

I'm afraid I do too, but if Thailand is going to compete with Burma and retain its existing production base it will need labour and that means higher production costs, on the otherhand, competition from Burma as a base should mean more competitve manufacturing/production costs, difficult.

[gregb]

The real problem we have right now is over production. There is already too much stuff floating around the planet. In previous times, growth could soak up all the extra production, but we have now entered the decline of global industrial civilization. Peak oil and energy depletion means the economic growth we all came to expect to continue forever is now over. The result of this is that consumer economies are collapsing as the investment growth that fuelled their consumption habits dies away. Governments are responding by printing money and issuing more government debt, which when combined with the lack of viable investments is causing the world to be awash in liquidity. This liquidity searches for a home until it finds a relatively benign economy like Thailand (debt only 41% of GDP) and then enters.

That causes inflation and will continue to cause inflation. What people don't realize is that there is no solution to this predicament short of mass global impoverishment and the collapse of the currencies (and governments) sustaining the problem. 90% of global production needs to cease, and people need to move back to the fields to find gainful employment. Factory jobs in the cities are only going to be available to a select few, and they are necessarily going to be located in the lowest wage and least environmentally friendly countries. There will always be select factories that don't relocate either because of a need for high trained personnel, because transport costs would make it inefficient to do so, because of government subsidies, etc. But those jobs are never going to make a significant impact on the economy.

Inflation will rise and employment will fall until enough are impoverished that consumption of only the most necessary of commodities slips to barely above the minimum necessary to sustain life, and then it will probably go below that. Hunger and disease will likely cause attrition in the population as the years wear on. This will put further pressure on over production and more job loss and more inflation as governments try to stave off the inevitable collapse. Within a few centuries the collapse will complete, and society will have reorganized at a lower level of complexity. Most things will be done by hand, and the idea of using copious amounts of energy to do something that a person can do with his own sweat will likely be a thing of the past. Not mentioned here are the likely resource wars that will occur during the initial stages of the decline.

We are at the beginning of the downward slide, as has happened to countless civilizations before us. Our great great grandchildren will not be able to imagine the unbelievable wealth we possessed. As bad as the inflation is now, enjoy these benign conditions while you can. The future is going to be worse.

So no, you are not alone in seeing high inflation in the near future. I, however, may be alone in feeling that this is the best that we can hope for given the current situation. The only real effective solution would require restarting the global growth engine, and that just isn't going to happen on this resource constrained planet.

[Naam]

not to forget that the sky will be falling!

[bendix]

Strength of the Baht is almost exclusively a function of the BOT and not markets, the currency is not traded as such on markets and is too small anyway in global terms.

Remind us again how the BOT has managed to keep the Baht so strong, and why . . .

[chiang mai]

Strength of the Baht is almost exclusively a function of the BOT and not markets, the currency is not traded as such on markets and is too small anyway in global terms.

Remind us again how the BOT has managed to keep the Baht so strong, and why . . .

It's the fall in Western currencies over the past two years or so that makes the Baht appear much stronger than it is, USD, GBP and the Euro have fallen by as much as a third. As for the other aspect of your question: BOT holds significant foriegn currency reserves, USD160 bill or so at last glance and it uses these funds to redirect THB as necessary. Having said, such redirection in the value of THB is in an attempt to keep it near to the midpoint of a basket of regional currencies. In recent times the BOT has sought to weaken THB through the mechanism described previously, global FOREX market trades do not impact on the value of THB to any meaningful degree since it is such a small currency that is not widely traded.

[chiang mai]

BTW Bendix, you and I were having these discussions three years ago in the days of Topfield, are you being mishievous?

[Naam]

It's the fall in Western currencies over the past two years or so that makes the Baht appear much stronger than it is, USD, GBP and the Euro have fallen by as much as a third. As for the other aspect of your question: BOT holds significant foriegn currency reserves, USD160 bill or so at last glance and it uses these funds to redirect THB as necessary. Having said, such redirection in the value of THB is in an attempt to keep it near to the midpoint of a basket of regional currencies. In recent times the BOT has sought to weaken THB through the mechanism described previously, global FOREX market trades do not impact on the value of THB to any meaningful degree since it is such a small currency that is not widely traded.

It's the fall in Western currencies over the past two years

is it because the glass is half full or half empty? what do you mean by "fall"? fall versus what currencies which caused the Baht's strength?

As for the other aspect of your question: BOT holds significant foriegn currency reserves, USD160 bill or so at last glance and it uses these funds to redirect THB as necessary.

for the record: the BoT holds these significant currency reserves because it keeps on intervening selling THB and buying USD in order to reduce the pressure on THB to appreciate. without these interventions we'd be back to square one (1985 till 1997), id est Thai Baht 25 for 1 US-Dollar.

i'm getting my coat!

[chiang mai]

By Western currencies I refer specifically to the US Dollar and British Pound, both have lost value over the past two to three years as a result of the high levels of indebtedness of those countries and their low levels of GDP. As a result the exchange rates of those currencies against THB has fallen from over forty to just above 30 and from 75 to its current 49 respectively.

The Dollar, with its classification as the worlds reserve currency, is home to a massive trade deficit where imports outstrip exports hence, the devaluation of the Dollar was an attempt to curb the appetite for them, Quantitative Easing (QE) being the main tool for this. Ditto that scenario existed within Great Britain also where although the extent of debt is less it remains significant and a partial devaluation of the Pound from its previously overvalued highs caused imports to become expensive and exports to become more favourably priced.

In light of the above it's perhaps easier to understand why the current relationship exists between THB, USD and GBP. THB, whilst pegged to USD at abnormally low levels prior to the Asian crash in 1997, it was allowed to float more freely after that. In more recent times the strength of THB against USD has meant that Thai exports have become expensive to countries that buy them whilst imports have become cheaper to Thailand. Today, the work of the BOT is to try to keep a balance between preventing THB from becoming too strong against USD in order to maintain exports at a sensibly priced level and preventing too much weakness in the currency to avoid the cost of imports from becoming prohibitively expensive. If the currency becomes too strong Thailand loses trade income, too weak and it stunts home growth.

Now, I truly am at the limits of my knowledge in all of this and now that I've presented my homework and set the currencies record straight, I'll be keen to understand any sensible views on the inflation issues in Thailand. For my self I can only see Thailand being the subject of very high inflation in the months to come since an increase in central bank rates would surely impact growth and hurt the domestic market at a time when global trade, particularly with the US, UK and Europe is very weak.

[RussellBellagrego]

Many juicy plums of wisdom expounded here. I suspect a few from "The Warton School" have relocated to Thailand. Then again, some comments reflect a far less stellar background in finance or economics. My personal view is in the declining dollar camp, not in the BOT control school. Quite simply, the BOT and Thailand, are so small and insignificant in monetary terms that they are zero factors in determining Thai Baht exchange, They blow hard and have big face, but beyond that, are a toothless tiger. Inflation, yep, we got it, along with the rest of the world, East or West. Been here seven years. Total buying power using dollars has declined over fifty percent real money, real inflation. Thank Bush, thank Obama, thank Geiger and there insane deficit spending.

[chiang mai]

I wanted to throw some boudaries around my question about Thai inflation otherwise it overlaps and turns into a free for all like the Financial Crisis thread, if I were to open it up a little I might start to consider things such as USD no longer being the reserve currency and Thailands need to build on the Chinese markets etc. But as things stand presently the global economic model is as it is and it's beyond my thinking to imagine what it might be in the future, any such attempt would be pure speculation any way.

But let's go down the weakeneing Dollar route for a moment, what happens if that happens! USD weakens, BOT spends all its foriegn reserves trying to keep a lid on THB, can't and eventually Thai exports become too expensive for the American market hence, Thai exports suffer whilst everyone here enjoys cheaper western imports, that sounds like the US/UK pre-crisis model, a solid framework for inflation to me.

[GuestHouse]

By Western currencies I refer specifically to the US Dollar and British Pound, both have lost value over the past two to three years as a result of the high levels of indebtedness of those countries and their low levels of GDP. As a result the exchange rates of those currencies against THB has fallen from over forty to just above 30 and from 75 to its current 49 respectively.

Your kidding yourself - The Bht collapsed in the mid 90s and we had a period of a few short years during which the Thai Bht was as cheap as chips - prompting thousands to up sticks and move to Thailand on the basis of an exchange rate which was not going to last.

The recovery of the Bht was all to do with recovery and restructuring in the Thai economy and very little to do with the $ of the £.

During the period the Bht was moving back towards its more historically normal exchange rate, and those who had got their exchange rate sums wrong in their retirement planning were squealing like stuck pigs, I and others were continually warning that the enemy was not exchange rates but inflation.

A contention that was pooh poohed by the squealing pigs, who believed the agony of their exchange rate dilemma was the worst thing that could ever befall them.

But time marches on and it is with times march that the impact of inflation bites - Who does it bite the hardest, those on fixed incomes - and hence we return to the bleating about unfair pension rules not allowing pension increases.

The fact is, inflation was always going to be a factor and the same people who could not work out that the exchange rate was not sustainable are the same people who could not work out the impact of inflation.

Early retirement and/or retirement is Thailand is not a poor man's game - never has been, never will be. Those growth figures we read - you know the ones where we have expats gloating that growth in Thailand is far greater than growth in the west - Well it is those growth figures that drive inflation.

And of course we have two inflation figures - Thai inflation and expat inflation - since we as expats use a different range of goods and services than do Thai people our inflation rate is different - A two year old shopping bill I have suggests inflation of around 9~10% per year.

To put that into perspective - A 50 year old expat "retired" in Thailand now with a fixed income of Bht100K per month will see his spending power drop in real terms to below 50K by the time he's 58 and to less than 10K per month by the time he's 75.

Worryingly, inflation in the expat health services is even higher, prices being fixed as they are on this idea of health tourism.

Edited April 14, 2012 by GuestHouse

[chiang mai]

By Western currencies I refer specifically to the US Dollar and British Pound, both have lost value over the past two to three years as a result of the high levels of indebtedness of those countries and their low levels of GDP. As a result the exchange rates of those currencies against THB has fallen from over forty to just above 30 and from 75 to its current 49 respectively.

Your kidding yourself - The Bht collapsed in the mid 90s and we had a period of a few short years during which the Thai Bht was as cheap as chips - prompting thousands to up sticks and move to Thailand on the basis of an exchange rate which was not going to last.

The recovery of the Bht was all to do with recovery and restructuring in the Thai economy and very little to do with the $ of the £.

In fact the Baht "collapsed" in 1997 as stated earlier, agreed that it's continued weakness until around 2007 was a function of its recovery and not USD strength weakness. But this thread is not about the history of the exchange rates, that was added as a part of my explanation to a wider audience at Naam's "request" in an a attempt to debunk the myth that the BOT keeps THB articfically strong. Most everything else you'vre written does not address the issue of what is likely to happen to inflation within Thailand!

[Orac]

By Western currencies I refer specifically to the US Dollar and British Pound, both have lost value over the past two to three years as a result of the high levels of indebtedness of those countries and their low levels of GDP. As a result the exchange rates of those currencies against THB has fallen from over forty to just above 30 and from 75 to its current 49 respectively.

Your kidding yourself - The Bht collapsed in the mid 90s and we had a period of a few short years during which the Thai Bht was as cheap as chips - prompting thousands to up sticks and move to Thailand on the basis of an exchange rate which was not going to last.

The recovery of the Bht was all to do with recovery and restructuring in the Thai economy and very little to do with the $ of the £.

During the period the Bht was moving back towards its more historically normal exchange rate, and those who had got their exchange rate sums wrong in their retirement planning were squealing like stuck pigs, I and others were continually warning that the enemy was not exchange rates but inflation.

A contention that was pooh poohed by the squealing pigs, who believed the agony of their exchange rate dilemma was the worst thing that could ever befall them.

But time marches on and it is with times march that the impact of inflation bites - Who does it bite the hardest, those on fixed incomes - and hence we return to the bleating about unfair pension rules not allowing pension increases.

The fact is, inflation was always going to be a factor and the same people who could not work out that the exchange rate was not sustainable are the same people who could not work out the impact of inflation.

Early retirement and/or retirement is Thailand is not a poor man's game - never has been, never will be. Those growth figures we read - you know the ones where we have expats gloating that growth in Thailand is far greater than growth in the west - Well it is those growth figures that drive inflation.

And of course we have two inflation figures - Thai inflation and expat inflation - since we as expats use a different range of goods and services than do Thai people our inflation rate is different - A two year old shopping bill I have suggests inflation of around 9~10% per year.

To put that into perspective - A 50 year old expat "retired" in Thailand now with a fixed income of Bht100K per month will see his spending power drop in real terms to below 50K by the time he's 58 and to less than 10K per month by the time he's 75.

Worryingly, inflation in the expat health services is even higher, prices being fixed as they are on this idea of health tourism.

Some very pertinent points there and it is a very worrying situation being faced by many here.

I retired early a couple of years ago at 42 and though I am fairly confident that I will be financially secure in the future there are a lot of potential problems that could hit and, as you rightly point out, inflation is probably the biggest threat.

I will take issue with your figures on inflation though as I do not think you are looking at the full picture but have only identified a couple of areas of expenditure. Though I don't disagree with your figures for supermarket spending this only makes up aboput 20-25 per cent of my monthly spending, the rest being mainly made up of accomodation costs which have gone down over the last two years and car payments which will come down drastically next year after HP loan paid off. Though health insurance has gone up and will continue to do so I am not sure if the increases are sustainable in the long term as there are less expats in Thailand (according to recent reports) and there are potentially less retirees who can afford it for reasons you have identified. From my point of view it is cheaper to self-insure and set aside money every year into a fund to cover future expenses.

[GuestHouse]

Most everything else you'vre written does not address the issue of what is likely to happen to inflation within Thailand!

Well I believe it does - but if you like my take on where the economy and inflation is going here it is:

From my own observation of our family spending I estimate the inflation rate to be around 9~10%, I'd say this is against a mix of spending that is partly those expensive expat goods and services but mostly local goods/foods and services.

I don't expect this inflation rate to drop any time soon.

The government's intervention in fuel prices is unsustainable and I suspect will only continue until the current political mess is resolved and Thaksin is back in power - Thereafter the populist price fixing can be relaxed.

The agricultural business is changing with massive movements of land from the rural poor to a small number of land speculators - There is also huge investment in bio fuels, oil palm, rubber and timber for pulping. I see these issues raising food prices higher.

Monopolies within the agricultural and food business continue and are being reinforced by this 'people's government - again more inflation on food.

The floods of last year have given a wake-up call to foreign investors, try to get a figure on production rates in previously flooded factories, or even a figure for factories that have not re-opened - These statistics are well hidden. The directors and shareholders of the companies impacted for the floods are not buying the government's line that it will not happen again while at the same time Burma is opening up, Cambodia and Vietnam are open for business and Indonesia is drawing in foreign investment.

Thailand has failed to educate its people for the future and failed to move up the value added economy ladder, choosing always to compete on low cost and now faced with serious concerns over infrastructure, environmental safety while the sources of Thailand's cheap labour are themselves building industry and employment at home.

To address this Thialand is going to have to step up investment in education and infrastructure - If they get it wrong, Thailand's manufacturing economy will flounder - if they get it right, Thailand, and is economy will grow and costs/prices will grow too.

As I mentioned above, health care costs are rising - Thailand aims to be an international hub for health tourism and as ever is the Thai way is fixing prices not on what is a reasonable cost/profit calculation but on what Thailand believes foreigners can afford. Fine if you are an overseas foreigner heading to Thailand for relatively cheap health care, not so good if you are a Thailand based foreigner forced to pay for health care at prices slightly discounted below those in the old country.

Overall I believe the growth of Thailand's middle class, the movement of people into towns, the promotion of credit within Thailand and the factors above are going to force prices higher - Thailand's growth is going to be translated to inflation.

I think the comparison is Europe of the late 1970s, change is coming, the Asian free trade area is going to increase growth, living standards and prices are going to change.

I believe inflation of 10% per year is going to be the norm for the time being, if anything it could go higher.

[chiang mai]

Very good, I can't disagree with very much of what you've written.

As we know there are at least two levels of inflation, one being Thai domestic inflation for nationals and the second being ex-pat inflation and I'm more concerned with the former. I think ex-pats gravitate over time from spending a high proportion of their funds on western goods to spending the vast majority on more sensibly priced local goods, I certainly have. Ditto the case for health care, it took me a few years but I finally stopped spending money at Bumrungrad and and similar and now all my health care needs are more than adequately catered to at Sriphat Hospital, a much more capable medical institution that is a quarter of the cost. So there are ways that ex-pats can mitigate their costs, to some degree, we certainly have and unitentionally as much as any thing we have managed to reduce our expenditure by at least a third without any fall in our standard of living.

[Naam]

Many juicy plums of wisdom expounded here. I suspect a few from "The Warton School" have relocated to Thailand. Then again, some comments reflect a far less stellar background in finance or economics. My personal view is in the declining dollar camp, not in the BOT control school. Quite simply, the BOT and Thailand, are so small and insignificant in monetary terms that they are zero factors in determining Thai Baht exchange, They blow hard and have big face, but beyond that, are a toothless tiger. Inflation, yep, we got it, along with the rest of the world, East or West. Been here seven years. Total buying power using dollars has declined over fifty percent real money, real inflation. Thank Bush, thank Obama, thank Geiger and there insane deficit spending.

juicy plums indeed. THB is an insignificant small Micky Mouse currency which trades offshore in insignificant small Micky Mouse volumina which are further restricted by the BoT which, due to tons of foreign currency reserves, can dance Polka or a Waltz with THB exchange rates at will.

Dear Naam,

Thai Baht Currency Restrictions

Further to the Bank of Thailand’s Measure No. 33/2003 (Additional Measure to Prevent Thai Baht Speculation), which came into effect in October 2003, XYZ Bank, Singapore Branch is subject to restrictions affecting its holdings of Thai Baht currency. These include the following:

Maintaining THB accounts in Thailand for settlement purposes only, where settlement means the settlement of securities transactions and cash payment transactions. The exception is for deposits of a tenor of at least 6 months or more.

Forfeiture of credit interest on its accounts (other than deposits of a tenor of at least 6 months or more)

Ensuring that the aggregated end of day balances for cash accounts with all financial institutions in Thailand do not exceed THB 300 million (the “Daily THB Limit”)

Imposition of deposit charge on THB account balances.

In relation to the Daily THB Limit, XYZ Bank, Singapore Branch will be required to adjust its Thai Baht balances in all its client accounts to be compliant with the permitted level as determined by the Thai authorities on a daily basis. As such accounts may include balances in Thai Baht held on your behalf, it is critical that we are able to adjust client THB balances to ensure compliance.

Accordingly, at any time that you are holding a long position in THB, we reserve the right in our absolute discretion and without prior notice to you to convert your holding of THB, in whole or part, into United States dollars at the prevailing spot rate.

Yours truly,

XYZ Bank, Singapore Branch

[Naam]

and now lets vow "no more hijacking" but concentrate on inflation.

[Naam]

I believe inflation of 10% per year is going to be the norm for the time being, if anything it could go higher.

Very good, I can't disagree with very much of what you've written.

i disagree very much with the "one size fits all" 10% inflation forecast without defining which categories will be hit by inflation and which not. i hear the inflation moaning since years without any definition or pinpointing and find that very "laymannish".

moreover, whether and how severe an individual or a family is hit by inflation depends on the expense structure and last not least on the ratio income/expenses.

oops! i just realised that a definition discussion is already in full swing.

Edited April 14, 2012 by Naam

[Naam]

And of course we have two inflation figures - Thai inflation and expat inflation - since we as expats use a different range of goods and services than do Thai people our inflation rate is different - A two year old shopping bill I have suggests inflation of around 9~10% per year.

To put that into perspective - A 50 year old expat "retired" in Thailand now with a fixed income of Bht100K per month will see his spending power drop in real terms to below 50K by the time he's 58 and to less than 10K per month by the time he's 75.

aw c'mon GuestHouse!

an expat Farang with a THB 100k fixed income spends all of these 100k only if he is a complete financial moron. it is more likely that he saves a part and reinvests to compensate for some, if not all, expected inflation.

[GuestHouse]

And of course we have two inflation figures - Thai inflation and expat inflation - since we as expats use a different range of goods and services than do Thai people our inflation rate is different - A two year old shopping bill I have suggests inflation of around 9~10% per year.

To put that into perspective - A 50 year old expat "retired" in Thailand now with a fixed income of Bht100K per month will see his spending power drop in real terms to below 50K by the time he's 58 and to less than 10K per month by the time he's 75.

aw c'mon GuestHouse!

an expat Farang with a THB 100k fixed income spends all of these 100k only if he is a complete financial moron. it is more likely that he saves a part and reinvests to compensate for some, if not all, expected inflation.

Look around you Naam, the chances that he's an utter moron should not be underestimated.

Regardless, the illustration is what inflation does to a fixed income - Mr Expat can take that on board and make a plan (saving, investing, getting back to work) or he can ignore it.

Saving is problematic - At the rates of inflation we have in in Thailand spending power (or even saving power) halves over eight years, the capital saved/invested that is feeding this income must double over eight years to keep real terms income the same - This of course is followed by the next 8 years.

Secure early retirement is not cheap - never has been, never will be.

If it were I'd be retired right now.

[Naam]

Look around you Naam, the chances that he's an utter moron should not be underestimated.

Regardless, the illustration is what inflation does to a fixed income - Mr Expat can take that on board and make a plan (saving, investing, getting back to work) or he can ignore it.

Saving is problematic - At the rates of inflation we have in in Thailand spending power (or even saving power) halves over eight years, the capital saved/invested that is feeding this income must double over eight years to keep real terms income the same - This of course is followed by the next 8 years.

Secure early retirement is not cheap - never has been, never will be.

If it were I'd be retired right now.

as far as the existence of "utter morons" are concerned i am reconsidering

savings/increase of income has to match only the average inflation based on expense structure. yes, there is food stuff inflation especially on imported food which nobody can explain as imports should be cheaper considering the strength of the Baht but then... TIT!

what most people forget is the compensation of inflation by the lack of income tax which of course applies only to expat retirees who's home countries do not levy tax on non-residents. but even those retirees, especially from continental Europe with a moderate income and in a moderate tax bracket will compensate expected inflation without any problems.

the financially "slightly better off" who pay in their home countries a 45% income tax, on top of that a fancy VAT on all goods and services plus a bunch of hidden taxes make a bored face when they hear "inflation ante portas!". that applies to people like me who finance their quite comfortable lifestyle not only fully by their tax savings but have a bundle left at the end of each "fiscal" year.

[chiang mai]

It's hard enough for the population of a western country to sustain anual inflation of 5% but when a large percentage of the population is poor, as in the case of Thailand, the risk of social unrest increases significantly. Historically Thai governments have tried to cap price rises on some core goods as inflation has edged upwards and that's certainly one answer, another answer is to increase interest rates which, as previously discussed, constrains business growth. Let me see, that's inflation and interest rates covered, what other options exist, ah yes, there's always the D word!

[GuestHouse]

That's all good stuff Naam but the tax saving is only a saving if a) there's a taxable income and returning to the old country is a realistic option.

What I read on TV suggests the calculatiion a lot of people make is along the lines:

I have x amont in cash and y amont in unearned income - rhis is enough for me to live without working in Thailand - I can retire.

Now exchange rates change and give a one off hit to the calculation and time ticks on and on and on as inflation eats the residue.

Even if, and it is a big if, our expat manages to hold onto his capital (no sweet smile lures it away) he needs to have made a very careful calculation and maintained course on a steady plan to achieve a secure esrly retirement.

[chiang mai]

And of course we have two inflation figures - Thai inflation and expat inflation - since we as expats use a different range of goods and services than do Thai people our inflation rate is different - A two year old shopping bill I have suggests inflation of around 9~10% per year.

To put that into perspective - A 50 year old expat "retired" in Thailand now with a fixed income of Bht100K per month will see his spending power drop in real terms to below 50K by the time he's 58 and to less than 10K per month by the time he's 75.

aw c'mon GuestHouse!

an expat Farang with a THB 100k fixed income spends all of these 100k only if he is a complete financial moron. it is more likely that he saves a part and reinvests to compensate for some, if not all, expected inflation.

Look around you Naam, the chances that he's an utter moron should not be underestimated.

Regardless, the illustration is what inflation does to a fixed income - Mr Expat can take that on board and make a plan (saving, investing, getting back to work) or he can ignore it.

Saving is problematic - At the rates of inflation we have in in Thailand spending power (or even saving power) halves over eight years, the capital saved/invested that is feeding this income must double over eight years to keep real terms income the same - This of course is followed by the next 8 years.

Secure early retirement is not cheap - never has been, never will be.

If it were I'd be retired right now.

I think you need to temper your statements Guesthouse, you speak from the safety of a younger mans view, in lucrative employment in the Middle East and with the security of being able to comment in hindsight not having committed to your final retirement decisions yet. Others have may well have given this subject much thought and made what they think were sound choices, not everyone is well versed in the issues of international finance, exchange rates et al but all will have looked at the some of the risks to some degree I'm certain.

The problem is at retirement age that once you make your bed you have to lay in it, there's most often no chance to revert to life as it existed before. Developing new plans after retirement involve making sure that your investments are solid and for retirees that invariably means lowest risks. But with global interest rates at a low and inflation creeping into everyones life it's almost impossible to make too much progress, those on limited fixed income of course are the most vulnerable. I seem to recall reading somewhere that something in the order of 80% of UK retirees underestimate their retirement needs and doubtless the numbers are similar in other countries. Investors such as Naam are far and few between both in terms of ability knowledge and assets, clued in observers of the financial maze such as yourself as also quite rare, it's important I think to remember that such people are the exception not the rule.

Of those not yet in retirement, something in the order of 70+% have insufficient savings to exist more than sixty days in the event they become unemployed - eduction in financial matters seems to be key here. So it's not so much that morons abound, it's more than some people, quite a few I suspect, have made choices that they now regret and that's a function of lack of education in financial matters and timing, to call them morons is perhaps a tad too strong, do you not think!

Edited April 14, 2012 by chiang mai

[GuestHouse]

Forgive me Chiang Mai, my comments were in response to Naam at post 24 - Naam states only a complete moron would act in the stated way. I'm simply point out that there are morons about and they do act recklessly.

I'm no longer in the Middle East - but let's not get lost in believing that lucrative employment in the Middle East is a privilege - It is a trade off with high rewards and high personal costs. Forgive me if, having put the ME behind me, I am now enjoying the rewards.

To be honest I think the real villains the real misanthropes here on TV are those who give out the advice to throw caution to the wind, and jump into life in Thailand without a very sound financial plan - They too often seem to be inviting others to join them in the mistakes they themselves have made - and yet the accusation of misguiding people is placed on those who advise caution.

But they are not the worst - the real villains, and you'll find me ranting on this often enough are the carpet baggers working the expat pension business - selling early access to pensions that were designed to keep people from the age of 65 onwards - a product being accessed early to do a job it was never designed to do.

I'm cautious by nature, I'm fortunate to have a good income and double fortunate to have gold plated final salary pensions behind me - But I am not retired on a secure income and telling people who are not as financially fortunate as I am not to retire - I'm cautiously advising people to think very very carefully about their plans - not to burn bridges and not to make decisions about retirement at a time in their life when they are vulnerable to persuasion which is against their long term best interests.

I really, genuinely do not want to see people getting themselves in the to a financial mess in Thailand - I've seen it far far too often.