BoT: Labour to curb GDP
Ageing workforce to shave 1.5 points a year
The Bank of Thailand forecasts that Thailand's ageing demography will dampen the country's annual GDP growth by 1.5 percentage points over the next 10 years. Thailand's labour growth rate averaged 5% over the past 10 years, but such growth is expected to decline to 3.5% a year in the next decade, said Don Nakornthab, senior director of the economic and policy department.
The slowing rate will subsequently shave 1.5 percentage points off Thailand's GDP growth each year for the next 10 years, Mr Don said.
Thailand's workforce contributes 1.5% to the country's GDP growth, according to central bank research.
"On average, the country's GDP growth was around 5% per annum for the past 10 years," Mr Don said. "As society ages and the workforce shrinks, Thailand's GDP growth could be at 3.5% annually over the next decade of this structural problem remains unresolved."
He said Thailand is also expected to face mounting pressure about lower migrant labourers because they are anticipated to migrate back to their respective countries, fuelled by economic development among neighbouring countries.
Nakanang Kulnartsiri, a Bank of Thailand economist, said Thailand is transiting from an ageing society to aged society, which is expected to occur in 2020. Thailand will be the first developing country entering into a hyper-aged society by 2035, Ms Nakanang said.
The UN defines an ageing society where those who are older than 65 years old represent more than 7% of total population. On the other hand, an aged society has 14% of the total population older than 65, while a hyper-aged society has 20% of people aged over 65.
Thais who are over 65 represent 7% of the country's population, and are expected to represent 13% in 2020. Thailand has been transitioning from the existing ageing society to an aged society at a faster pace compared with other developing countries.
"On average, developed countries take a century to become an ageing society, while Thailand took only 20 years," Ms Nakanang said.
Countries entering into a hyper-aged society are mostly identified as developed economies with higher income per capita at above US$12,500 (416,985 baht) per year.
Meanwhile, Thailand's per capita income stands at $5,720 a year, meaning Thais are ageing faster than they build wealth. In the Asean region, Thailand has the highest ageing population ratio at 10% of total population, followed by Singapore (9%), Vietnam (7%), Malaysia (6%), and Indonesia and the Philippines (5% each). Thailand's ageing population ratio is expected to increase to 18% in 2030. Ms Nakanang said the fall in Thailand's labour force also restrains future economic expansion.
The country's declining workforce is mainly due to early retirement, starting from 45 years, and a shift towards informal workers, of which around 20 million are 40-60 years old, making up a significant portion of the total population of 67 million, she said.
The central bank's proposed solution
to tackle this structural problem is to enhance and re-skill the workforce as part of a lifelong learning process. Increasing work flexibility, such as adjustment in jobs designed to fit labourers' requirements, and enhancing labour rights are other solutions to boost workforce productivity, according to the central bank.