The Lifecycle Model : Has the Timing of the COVID-19 Pandemic Ruined Thailand’s Longrun Economic Prospects?

This paper examines the impact of Thailand’s population age structure on its savings rate. It uses cointegration techniques on time-series data for the period 1980-2018. The analysis suggests that the ratio of minors and of the aged to the working-age population does have a negative and significant impact on the savings rate. This provides support for Modigliani’s lifecycle theory of saving.Alongside this empirical analysis, the paper examines Thailand’s socioeconomic context. Much of Thailand’s economic activity has been put on hold during the COVID-19 pandemic, and economic growth prior to the pandemic was weaker than its ASEAN neighbours. When economic activity is able to resume as normal after the pandemic, Thailand’s population will be structurally older. The United Nations World Population Projections forecast that in 2020, Thailand’s working-age population ratio will start shrinking, and the ratio of the aged to the working-age population will increase more than 5 percentage points from 2020 to 2025. The cointegration analysis in this paper suggests that Thailand’s savings rate falls by 10 percentage points for every 1 percentage point increase in the ratio of the aged to the working-age population. As the pandemic crisis takes time to resolve, Thailand will likely face a lower savings rate and have fewer domestic funds available for investment. These factors provide significant challenges for Thailand’s long-run economic growth prospects