Thailand Economic Monitor - June 2016: Aging Society and Economy

© Benny Manser/World Bank

Key Findings

Thailand’s economy shows signs of recovery. Continued reforms will be important to unleash new sources of growth.

  • The Thai economy accelerated to 2.8% in 2015, compared to 0.9% in 2014.
  • Economic growth is expected to moderate to 2.5% in 2016.  Tourism and fiscal stimulus are key drivers of growth.
  • Foreign direct investments are likely to remain subdued, reflecting soft external demand and continuing political uncertainty.
  • Timely implementation of public infrastructure projects in 2016 and 2017 can contribute to a more positive outlook.
  • Poverty is expected to continue declining, albeit at a slower rate than in the past. Poor households in rural areas are affected by falling agricultural prices.
  • The prolonged slowdown has highlighted structural challenges such as implementing public investment, maintaining and indeed raising export competitiveness, and addressing critical skills mismatches. Implementing reforms to address these challenges will be key to stimulate long-term growth.

The Thai population is aging rapidly. The declining share of working age population will affect economic growth.

  • As of 2016, 11% of the Thai population (about 7.5 million people) are 65 years or older, compared to 5% in 1995.
  • By 2040, it is projected that 17 million Thais will be 65 years or older – more than a quarter of the population.
  • Together with China, Thailand has the highest share of elderly people of any developing country in East Asia and Pacific.
  • The primary driver of aging has been the steep decline in fertility rates, which fell from 6.1 in 1965 to 1.5 in 2015, as a result of rising incomes and education levels and the successful National Family Planning Program launched in 1970.
  • The working age population is expected to shrink by around 11% as a share of the total population between now and 2040 – from 49 million people to around 40.5 million people.
  • This decline in working age population is higher in Thailand than in all other developing East Asia and Pacific countries, including China.

The speed of demographic transition in Thailand poses new challenges and opportunities.

  • In labor markets, mitigating the decline of the working age population and enhancing the productivity of the shrinking labor force will be a priority.
  • Pension spending, health care and long-term care systems for elderly people will pose large long-term financial burdens.
  • At the same time, this demographic shift will position Thailand as a provider of services to the growing elderly population across the region.
  • The economic reform agenda to lift Thailand’s long-term growth takes on an added sense of urgency in light of Thailand’s ticking aging clock.