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Thailand’s aging population hits consumption and economic growth
Thailand is experiencing the global megatrend of an aging society, officially becoming aged in 2023 and soon transitioning to a super-aged society. This presents economic and social challenges, but also creates new market opportunities. Krungsri Research sees this as both a policy issue and a business opportunity.
The demographic changes in Thailand, including an aging population and declining birth rate, are significantly impacting the country’s domestic consumption, which has been a major driver of economic growth.
Key Takeaways
- Thailand’s economic growth is heavily reliant on domestic consumption, which is being impacted by demographic changes such as an aging population and lower birth rate.
- The high cost of living, sluggish economy, and high household debt are contributing to lower domestic consumption in Thailand, with potential for further reduction if the birth rate continues to fall.
- To address the challenges posed by demographic changes, the Thai government needs to adjust its economic model to increase incomes and improve the quality of life, while also providing support to small and medium-sized enterprises (SMEs) to adapt to the changing economic environment.
The study by the Kasikorn Research Centre highlights that compared to other countries in the region, Thailand has a higher reliance on domestic consumption for economic growth.
Factors contributing to lower consumption include a sluggish economy, high cost of living, and high levels of household debt. The study also points out that if the birth rate continues to decline, domestic consumption will decrease further.
Additionally, the lower productivity and incomes in the agriculture sector affect purchasing power, particularly for the elderly population. To address these challenges, the Thai government is urged to adjust its economic model to improve incomes and quality of life, with a focus on supporting small and medium-sized enterprises (SMEs) and incentivizing the hiring of older individuals and skilled foreigners.
Approximately 34% of the elderly in Thailand earn an average monthly income that falls below the poverty threshold. Out of the 5.1 million senior citizens, 3.7 million (59%) continue to work in agriculture, earning less on average than those in other sectors.
The Kasikorn Research Centre indicates that demographic shifts pose a critical challenge for the Thai government. It is imperative for the government to revise its economic model to support rising incomes and enhance the quality of life, which will in turn mitigate the reduction in consumption.
The silver economy presents new opportunities for the finance industry, as many Thai seniors struggle with managing finances and accessing services. Financial institutions should create and promote products tailored to this market, such as high-yield deposit accounts and health-related financial products like insurance and medical loans. This will help elders access better healthcare and manage their finances more effectively.
From an ‘aging’ to an ‘aged’ society: Thailand is getting old before it gets rich
It has long been observed that Thailand is aging rapidly, and as long ago as 2005, Thailand became an ‘aging society’1/, that is, at least 10% of the population was 60 or older.
However, in 2023, Thailand reached another demographic milestone when the share of over-60s reached 20% of the population, or 13.2 million people, qualifying it as an ‘aged society’2/.
It therefore took less than 20 years for the share of the elderly in the population to double and for the country to go from an aging to an aged society, a rate that is significantly faster than that recorded in many other countries, including Singapore and China (25 years), the United Kingdom (45 years), and the United States (69 years)3/.
Moreover, in 2023, 13.6% of the Thai population was 65 or over, and the United Nations4/ expected this proportion to grow to more than 20% by 2029, which would then qualify Thailand as a super-aged society.
This is the most aged of the UN’s demographic categories, and once Thailand reaches this stage, it will join countries including Japan, Germany, Italy, and France, but while these are all wealthy developed economies and that are thus ‘old but rich’, Thailand is at risk of becoming ‘old before it is rich’.
1/ The UN classifies aging countries into 3 levels: (i) If 10% of the population is over 60 or 7% over 65, the country is classified as an ‘aging society’; (ii) if 20% of the population is over 60 or 14% over 65, it is an ‘aged society’; and (iii) when 20% of the population is over 65, the country becomes a ‘super-aged society’.
2/ Department of Older Persons (DOP), https://www.dop.go.th/th/statistics_page?cat=1&id=1
3/ Bangkok Post, https://www.bangkokpost.com/business/general/2643057/thailands-silver-economy-trends-and-opportunities
4/ UN World Population Prospects 2022
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