Thailand is racing to revive — and renovate — the economy, bringing with it profound social changes. Infamous for its role in Asia’s financial meltdown a generation ago, the country is running headlong into a hurdle confronting the region: a dwindling and graying population.
Japan, South Korea and Singapore attract much attention for their low birthrates and multiplying ranks of seniors. This trio were fortunate enough to become rich before they grew old; they have the financial capacity to manage the transition. Malaysia and the Philippines, which are nowhere near as wealthy, face a slowdown in births that has not yet become a consuming policy challenge.
However, Thailand is squeezed in a way that these neighbors are not. The country is an emerging market with advanced economy demographics: Few babies are coming into the world, while ranks of seniors are swelling, but without the social safety net that typifies some wealthy regional counterparts, or the US or Western Europe.
Its fertility rate is barely half the level at which a population can naturally replenish itself, while its headcount could shrink by 50 percent over the next six decades in the absence of urgent measures, the Thai Ministry of Public Health said recently.
The number of working-age people is forecast to shrivel to a mere 14 million from 46 million, projections say.
The jeopardy seems to have been acknowledged. An overhaul of surrogacy services is in the works that would end a ban on foreigners availing themselves, and allow gay and lesbian couples to have children. It would also burnish Thailand’s reputation as a hub for medical tourism. The change would take effect once moves to allow gay marriage become law.
There are also more immediate needs, such as lifting an anemic rate of growth and ending a worrisome decline in consumer prices. Thai Prime Minister Srettha Thavisin is pushing the Bank of Thailand to cut interest rates immediately, but the bank has resisted.
While it is often counterproductive to try to publicly bludgeon a central bank into submission, Srettha has a point: Inflation is certainly not a problem and the economy is losing altitude. Officials now expect GDP to expand 2.7 percent this year, down from a prior estimate of 3.2 percent. The expansion has crawled along at an average of less than 2 percent over the past decade.
The government is also championing looser fiscal policy. The cabinet last week signed off on spending plans that are to widen the budget deficit and boost borrowing. Srettha has promised a 500 billion baht (US$13.6 billion) cash handout, a so-called digital wallet, that would put 10,000 baht into each adult’s pocket. The pledge has become bogged down in bureaucratic disputes about how to finance the stimulus.
The money is urgently needed, Srettha says.
Tourism, one of the economy’s big earners, has not escaped this policy activism. Srettha has signed a visa waiver deal with China — the largest source of visitors — and offered temporary visa waivers for travelers from Taiwan, India and Kazakhstan. He is advocating a single visa with neighbors modeled on the EU’s Schengen arrangements. Also under consideration are casinos inside large entertainment complexes.
Quite the to-do list for Srettha, a political neophyte who took office at the head of a coalition government after elections last year. Does Srettha’s ambitious approach reflect a newcomer’s idealism, or a fatalism that sooner or later the military will again turf out an elected team? Thailand has a long history of coups. It would be foolish to think the most recent one, in 2014, is the last.
Civilian leaders come and go. One thing that does have staying power is the punishing demographic math. Thailand’s total fertility rate, the average number of children a woman can expect to bear, has been stubbornly below the replacement level of 2.1 for decades.
It was about 1.3 in 2021, the World Bank said.
That is lower than Indonesia, the Philippines and Malaysia. Singapore’s rate reached a record low of 0.97 last year, preliminary estimates showed, although the city-state has a long-standing policy of topping up the local population with foreign workers.
The trends are stark. The global total fertility rate of more than 4.8 in 1950 declined to about 2.2 in 2021 and is projected to retreat to 1.8 in 2050 and 1.6 in 2100, a study published last month in The Lancet said.
Only half a dozen of the 204 nations surveyed are forecast to be above replacement level at the end of the century. The implications for economics are profound.
“Unless governments identify unforeseen innovations or funding sources that address the challenges of population aging, this demographic shift will put increasing pressure on national health insurance, social security programs, and healthcare infrastructure,” wrote joint first authors Natalia Bhattacharjee, a lead research scientist in the University of Washington’s Institute for Health Metrics, and Evaluation, and Austin Schumacher, an assistant professor at the institute.
“These same programs will receive less funding as working-age, tax-paying populations decline, further exacerbating the problem,” they wrote.
This challenge can be expected to outlast Srettha or any of his sucessors. The innovation and urgency are well-placed. The direction is correct. The trick will be sustaining the pace of innovation. Thailand’s reinvention is one for the long haul.
Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously, he was executive editor for economics at Bloomberg News.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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