BANGKOK, Thailand – Thailand is facing a growing economic challenge from high public and household debt, an ageing population and slowing growth, with combined debt estimated at around 150% of GDP, according to the TISCO Economic Strategy Unit (TISCO ESU). Methat Rattanasorn, head of economic research at TISCO ESU, said public debt is expected to reach about 68% of GDP. Although household debt has declined gradually, government borrowing to support the domestic economy has kept Thailand’s overall debt burden high.
“Even though households have less access to credit, the government ultimately has to borrow to support the economy, keeping the overall debt burden elevated,” Methat said. Thailand is also facing structural pressures similar to what economists describe as “Japanification” — a combination of low economic growth, weak inflation and a shrinking workforce. Methat said Thailand’s working-age population has already passed its peak and is gradually declining. The proportion of Thais aged 65 and above has reached about 14%, a level Japan reached 28 years earlier in its demographic transition. Thailand’s birth rate has also fallen below 2.0, below the replacement level of about 2.1, pointing to a faster decline in the number of children being born in the years ahead.
Thailand is entering this ageing phase at a much lower income level than Japan. When Japan reached a similar stage, its GDP per capita was about US$37,000, compared with roughly US$20,700 in Thailand today. This has led to concerns that Thailand could become an ageing society before becoming a high-income economy — a situation often described as “getting old before getting rich.”
An ageing population can also weaken demand for major purchases such as homes and cars. Combined with high household debt, this can encourage “deleveraging”, with households using more of their income to repay existing debt and taking on less new borrowing. That leaves less money circulating through consumption and can reduce Thailand’s potential economic growth over time.
Methat said increasing productive investment is therefore essential. Private investment currently accounts for less than 20% of GDP, while Thailand has become increasingly dependent on imported capital goods. He noted that imported capital goods accounted for about 11% when investment represented around 35% of GDP, but now account for about 14% while investment has fallen to around 20% of GDP. Greater dependence on imported capital goods can limit the domestic value added created by investment, with more money flowing overseas, Methat said.
At the same time, attracting substantial foreign investment can increase imports of machinery and other capital goods, potentially putting pressure on the current account. TISCO ESU expects Thailand’s current-account deficit to reach about 3%, although Methat said the country’s foreign-exchange reserves remain adequate, covering roughly 10 months of imports.
The analysis points to the need for Thailand to attract investment that creates greater domestic value, develops new industries and strengthens productivity rather than relying primarily on imported capital.
