Thailand Has a Developing Economy and a Big First World Problem

27-Jul-2019 Intellasia | Bloomberg | 6:02 AM Print This Post

Getting old can be hard under any circumstances, and harder still when you’re poor. That’s the predicament for Thailand, the developing country first in line to face the consequences of a first-world-style baby bust.

Data published last month by the United Nations show births in Thailand have dropped to a level on par with Switzerland and Finland, two ultra-wealthy countries with which it has almost nothing else in common.

Those numbers mean that more than a quarter of Thailand’s people will be over 60 by 2030and most will be poor. The International Monetary Fund says a shrinking labour force will hold back economic growth by as much as a full percentage point every year for the next two decades.

Rapid-aging is a condition that, until now, has really only afflicted the richest nations because low birth rates tend to go hand-in-hand with higher incomes. The best-known exception is China, where the one-child policy (abandoned in 2015) has set the stage for a population squeeze around mid-century. But it’s Thailand that is breaking new, treacherous ground by becoming the first big country to get old before it’s had a chance to become prosperous.

“Clearly this is going to be an issue for Thailand and a challenge,” said Chua Hak Bin, an economist who covers Southeast Asia at Maybank Kim Eng Research Pte in Singapore. “Thailand is kind of stuck in the middle: It’s an emerging country and yet it faces the demographic headwinds you see in advanced economies.”

For years, economists and government planners assumed that overpopulation was the world’s main demographic worry, not population loss. But that idea may be wrong.

In the last 50 years, birth rates have dropped in every country on the planet. The change is happening as people move to cities, where women have more access to education and contraception. Fewer babies is good for many families and also the environment, but there are economic consequences, too: fewer consumers, workers and tax payers, and fewer people to care for the elderly.

Since 2000, Thailand has urbanised faster than any other big country besides China, which is the main reason fertility rates are falling now. But the push to have smaller families started back in the 1970s, when an anti-poverty programme swept the country led by an activist named Mechai Viravaidya, who became known as ” Condom.”

Over two decades, Thailand’s fertility rate plunged from 6.6 to 2.2.

Now, at 1.5, It’s among the world’s lowestlower than China’s 1.7 and well below the 2.1 needed to keep population steady. The UN estimates Thailand’s baby bust will cause the country of roughly 70 million to lose more than a third of its people by century’s end.

“I don’t want to have a lot of kids if I can’t guarantee I’ll be able to give them a good life,” said Nandini Seghal, a 28-year-old account manager at a Bangkok ad agency.

Thailand doesn’t have too much time to fix its problems, says Stanford University demographer Shripad Tuljapurkar. It must find ways to boost labour productivity, otherwise the shrinking pool of workers won’t be able to support the country’s retirees, whose numbers will balloon in the mid-2030s.

“If they miss this opportunity,” he said, “things are going to look pretty bleak.”

Problem is, with two military coups since 2006, plans to address the country’s aging have been sparsely implemented. And a new government, elected in March and cobbled out of an unwieldy 19-party coalition, looks no more able to act.

One potential source of relief, though, may come from Thailand’s openness to immigrationan attitude that separates it from other places with population problems like South Korea and Japan. Foreigners make up 10 percent of Thailand’s overall workforce, with higher numbers at the biggest companies.

“Foreign workers are more than willing to fill the gap,” said Pakpoom Srichamni, president of Sino-Thai Engineering & Construction Pcl, a Bangkok-based firm of 10,000 workers, 30 percent of whom aren’t Thai.

Even so, the country is already becoming a regional laggard, with average annual growth dropping every decade since the 1990s, from 5.3 percent to 4.3 percent to the mid-3s now. In the first quarter, growth clocked in at 2.8 percent, the slowest in more than four years. And with inflation stuck below 1 percent, interest rates under 2 percent and a rapidly appreciating currency, parts of the country’s economic profile are starting to resemble aging Japan more than developing neighbours like Indonesia or the Philippines.

Paying more for healthcare will be hard for a country with per capita income of just $6,362it’s not easy for Switzerland or Finland, either, where the numbers are $78,816 and $48,580. Costs for Thailand’s public health care system have risen 12 percent per year on average over the past 12 years and are now Southeast Asia’s highest, according to the Thailand Development Research Institute.

Then there’s Thailand’s patchwork of old-age pension schemes, which ranks last in terms of sustainability among 54 countries surveyed by global insurance company Allianz SE. Funds could dry up within 15 years without major tax reform, according to Somchai Jitsuchon, a Thailand central bank committee member.

“We need to find more income,” he said.


Category: Thailand

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