Thailand’s joining Japan and Korea as one of the “old men” of Asia

Thailand’s joining Japan and Korea as one of the “old men” of Asia

By Gwynn Guilford @sinoceros August 23, 2013

The latest news on Thailand’s economy has been grim. Not only did the country enter a recession (paywall) in the second quarter of this year, but it increasingly faces the twin specters of rising household debt and capital outflows. And now there’s news that makes the outlook even grayer—literally. As a new Bank of America/Merrill Lynch report puts it, Thailand is “emerging as the old man” of Southeast Asia. Due to a low fertility rate, its population is aging faster than previously assumed. The dangerous implication for its economy is that Thailand’s working-age population will peak in 2017, rather than 2020, according to recent recalculations by the United Nations. So the labor force will start shrinking sooner than planned, falling 1.2% between now and 2023, according to BofA/ML projections. More on why that’s bad in a moment, but first, here’s the chart. As you can see, by about 2060, Thailand’s working-age (the orange line) population shrinkage will have become the biggest in Asia:


(Data indicate working-age population, not total population.)This is important because, in real terms, adding workers to your economy is one of the two ways to grow. The other option—getting the same number of workers to produce more—is expensive and notoriously tricky to pull off. That’s why emerging markets with swelling labor forces grow fast, while rich-world countries with falling populations face the constant struggle of ramping up productivity.

Another problem: When a country runs out of new workers, demand for existing ones rises, driving up wages. That means companies have to either accept thinner profit margins, or pass the costs on to consumers and risk being less competitive with imports and services from abroad. Falling consumer spending resulting from aging (pdf) can also entrench deflation, and once prices start dropping, it canbecome a vicious cycle.

As you can see in the chart above, Japan, home to the world’s most calamitous graying, saw its working-age population peak way back in 1995. That has likely helped stymie GDP growth and perpetuate deflation.

But while Japan is the demographic anomaly in Asia, it won’t be for long. South Korea is rapidly following Japan’s lead; the ranks of its workers will start falling after 2016. And China’s working population will peak pretty much any day now.

With those countries to compare itself to, Thailand’s situation hardly looks dire. But the light is less flattering from a southern exposure. Thailand is the only Southeast Asian country whose workforce will shrink in the next decade, according to BofA/ML. Because the country is heavily dependent on exports—it makes a good chunk of the world’s cars, electronics and rice—it will have a hard time competing with countries like the Philippines (whose population won’t peak until 2085) and Indonesia (2058) for its share of regional trade.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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