Demographic changes in Thai society, with an increasingly elderly population and lower birth rate, are impacting Thailand’s domestic consumption, which is a major driver of economic growth, according to the Kasikorn Research Centre (KRC).
Domestic consumption accounted for 58% of Thailand’s economic growth in 2022, compared to 53% about a decade ago. This is in contrast to other countries in the region, which depend less on domestic consumption for economic growth, according to the study.
For instance, in Singapore, which is becoming a “super-aged” society, the study maintains that the island state’s dependence on domestic consumption for economic growth has been reduced from 37% to 31%. A similar trend is also being observed in Indonesia and Vietnam.
Factors contributing to lower consumption include a sluggish economy, the high cost of living and high levels of household debt, says the study, noting that, if the birth rate in Thailand falls further, domestic consumption will further reduce.
About 34% of older people in Thailand have average monthly incomes below the poverty line. Of the 5.1 million elderly people, 3.7 million (59%) are still working in the farming sector and receive average incomes which are lower than in other sectors.
Compared to other sectors, agriculture has the lowest productivity and the average monthly income is only 6,975 baht, which adversely affects the purchasing power of these people.
KRC says the demographic change poses an urgent challenge for the Thai government, which must adjust its economic model to allow for increases in incomes and the quality of life of the people, which will slow consumption contraction.
99.5% of 3.18 million SMEs account for 71% of employment, but the revenue from the SMEs accounts for just 35% of the country’s GDP, according to the centre, as it suggests that the government assists SMEs to keep abreast of changes in the economic environment.
The centre also recommends that the public sector provides incentives to the private sector to hire older people and attract more foreigners, who have high purchasing power or skills, to Thailand.
