Hard math is driving Thailand’s race to reinvention

By Daniel Moss

Thailand is racing to both 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 today 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, nowhere near as wealthy, face a slowdown in births that hasn't yet become a consuming policy challenge.

But Thailand is squeezed in a way these neighbors aren't. 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; headcount could shrink by 50% over the next six decades in the absence of urgent measures, the health ministry warned recently. The number of working-age people will shrivel to a mere 14 million from 46 million currently, according to the projections.

The jeopardy appears 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 will also burnish the kingdom'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. Prime Minister Srettha Thavisin is pushing the Bank of Thailand to cut interest rates immediately; the bank has resisted. While it's often counterproductive to try to publicly bludgeon a central bank into submission, Srettha has a point: Inflation certainly isn't a problem and the economy is losing altitude. Officials now project gross domestic product will expand 2.7% this year, down from a prior estimate of 3.2 per cent. The expansion has crawled along at an average of less than 2 per cent over the past decade.

The government is also championing looser fiscal policy. The cabinet last week signed off on spending plans that will widen the budget deficit and boost borrowing. Srettha has promised a 500-billion-baht ($14 billion) cash handout, a so-called digital wallet, that will put 10,000 baht into each adult’s pocket. The pledge has become bogged down in bureaucratic disputes about how to finance the stimulus: taxes, borrowing or some combination of the two. The premier says the money is urgently needed.

Tourism, one of the economy's big earners, hasn't escaped this policy activism. The PM has signed a visa waiver deal with China — the largest source of visitors — and offered temporary visa waivers for travelers from India, Taiwan and Kazakhstan. He's advocating a single visa with neighbors modeled on the European Union's Schengen arrangements. Also under consideration: 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, will be 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 over the course of her life, has been stubbornly below the replacement level of 2.1 for decades. It was around 1.3 in 2021, according to the World Bank. That's lower than Malaysia, Indonesia and the Philippines. Singapore's rate reached a record low of 0.97 last year, according to preliminary estimates, though the city-state has a long-standing policy of topping up the local population with foreign workers.

The trends are stark. The global TFR of more than 4.8 in 1950 declined to around 2.2 in 2021 and is projected to retreat to 1.8 in 2050 and 1.6 in 2100, according to a study published in The Lancet last month. Only half a dozen of the 204 nations surveyed will 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,” joint first authors Natalia V. Bhattacharjee and Austin E Schumacher wrote. “These same programs will receive less funding as working-age, tax-paying populations decline, further exacerbating the problem.”

This challenge will outlast the current Thai premier or any of the generals that may aspire to succeed him. 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.