Thailand is officially an aged society this year, with the number of people 60 years old and above rising to 13.5 million, or about 20 per cent of the total population.

Thailand will become a super-aged society in the next 10 years when the 60-plus population will reach 28 per cent of total population or more than a quarter of it, according to projections by the National Economic and Social Development Council (NESDC).

The working population has decreased by 3 million every 10 years, going in the opposite direction of the estimated increase in demand for workers from 37.55 million in 2017 to 44 and 71 million in 2033, the NESDC, a state-owned think-tank, said.

A drag on economic growth

A rapidly aged society will have repercussions for economic development. It is one of the key factors held responsible for slowing economic growth over the past 20 years.

The average gross domestic product growth rate between 2010 and 2022 was just 2.6 per cent annually compared with 7-8 per cent annually in the first three decades of Thailand’s modern economic development from the 1960s to the 1980s, according to World Bank statistics.

Currently, Thailand’s economic growth is lagging behind Vietnam and Indonesia where the working age group makes up the larger share of total population.  The biggest challenge for the working and aged groups in Thailand is to save enough money for retirement.

The best option 

Traditionally, depositing money in bank accounts and investing in the stock market were said to be the main options.  But as economic growth has slowed, stock investment returns have diminished.

“Savers may need to look at investing in the bond market during times of slower economic growth and low inflation,” said Kobsidthi Silpachai, head of capital markets research at Kasikornbank.

“Investing in the stock market is good when we have mild inflation, but now our economy has become low-inflation and low-growth,” he pointed out.

Thailand’s economy is following the same pattern as Japan, which has slow growth and low inflation rate, said Kobsidthi.

The two countries, however, are starkly different in their overall economic development, as the Japanese get rich before they get old while Thais get old before they are rich.

So there is a greater challenge for the average Thai to ensure a stable income, especially after retirement.

Yet, one-size does not fit all and therefore everyone would need a balanced portfolio in order to diversify risks, according to market analysts.

The general rule is that younger people should invest more in stocks, while senior citizens should favour debt instruments in order to protect the principal amount of investment.

On the bright side for investors eyeing more investments in the bond market, the government would need to issue more bonds to raise funds to finance budget deficits.

Due to the lower risk of debt default, government bonds are considered to be safer than corporate bonds, which have a higher risk of default.

The Finance Ministry plans to issue savings bond to raise about 100 billion baht in fiscal 2024. The savings bonds are being designed to cater to retail investors.

The Finance Ministry also plans to issue normal government bonds worth about 1.25 trillion baht in fiscal 2024. Recently, Prime Minister and Finance Minister Srettha Thavisin announced a new plan to borrow 500 billion baht to finance handout payments under the digital wallet scheme aimed at stimulating the economy. Therefore, more bond insurance is expected.

People can buy savings bonds directly, and can invest in normal government bonds via mutual funds.

The local bond market has become attractive recently after the investors bet that the US interest rate had peaked, causing US bond yield to decrease recently.

Thailand’s bond yield is in line with the US bond yield. Bond yield goes down when investors buy more bonds in the market while it rises when investors dump bonds for fear of a fast-rising interest rate.

Ariya Tiranaprakit, an executive vice-president of the Thai Bond Market Association, said that buying government savings bonds was recommended as the Thai government had a high credit rating and low risk of default.

ESG Fund for investors

Meanwhile, the Finance Ministry will also introduce a new investment vehicle called the “Thailand ESG Fund” designed to promote investment in listed companies taking into account if they have a sustainable business model, paying attention to the environment, social, and governance. The fund is expected to be available in December, after approval by the Cabinet this month.

The mutual fund would invest the money in stocks of companies on the ESG list of the Stock Exchange of Thailand and long-term bonds.

Investors have to hold their investment units for at least eight years, compared with 10 years if they invest in a super savings fund (SSF). Investors can get a tax reduction of up to 100,000 baht annually.

The Finance Ministry has shortened the investment tenure of the TESG to make it more attractive than the SSF.

“As the landscape of the Thai economy has changed, so have investment opportunities. In the long run, investing in debt instruments would be better than in equity,” said Kobsidthi.

By Thai PBS World’s Business Desk