{"text":[[{"start":7.273,"text":"An emerging market once hailed as an “Asian tiger” is on the verge of supplanting Japan as Asia’s new symbol of stalled growth and rock-bottom interest rates."}],[{"start":16.536,"text":"Thailand’s main policy interest rate is just 1 per cent, one of the lowest levels globally behind Switzerland. Even as central banks around the world rush to tighten policy and cool inflation triggered by war in the Middle East, the Bank of Thailand held rates on Wednesday for a third consecutive meeting."}],[{"start":34.262,"text":"Many analysts expect Thailand could soon have lower rates than Japan, which was mired in negative rates and deflation for years but increased rates to 1 per cent in June and is expected to do so again as soon as September to fight rising prices."}],[{"start":48.718,"text":"Thailand’s low rate underlines how it has become one of the region’s prime risks for “Japanification” — a prolonged period of low inflation and low growth — as high household debt, a rapidly ageing population and sputtering economic engines such as tourism choke consumer spending."}],[{"start":66.353,"text":"“Asia as a whole does face a higher Japanification risk compared to the rest of the world because it is ageing. And Thailand is facing the brunt of it because the level of debt is already very high,” said Louise Loo, head of Asia economics at Oxford Economics."}],[{"start":82.8,"text":"While China faced similar risks, it had more economic and fiscal levers to support its economy, she said."}],[{"start":null,"text":"
"}],[{"start":88.294,"text":"Thailand’s low interest rate was “a structural problem rather than cyclical”, said Nond Prueksiri, senior economist at Siam Commercial Bank’s Economic Intelligence Center. “We don’t have a significant demand pull. We are an ageing society, we have high debt, so there is not much upside that the consumer is going to spend.”"}],[{"start":108.4,"text":"Before the conflict in the Middle East, Thailand reported deflation for 12 straight months. The outbreak of the war pushed up prices but pressures are already easing and headline inflation fell for a third straight month in July to 1.95 per cent."}],[{"start":121.397,"text":"The deflationary pressures do not bode well for south-east Asia’s second-largest economy, which aims to clinch high-income status by 2037. Annual growth has been stuck at around 2 per cent for years and is forecast to come in lower this year by the World Bank and the IMF."}],[{"start":null,"text":""}],[{"start":138.561,"text":"The Covid-19 pandemic dealt a severe blow to tourism, a pillar of the economy. Exports are under pressure due to stiff competition from cheaper goods from China and the rise of regional manufacturing hubs such as Vietnam. The threat of higher US tariffs and a shrinking labour force are also hurting domestic production."}],[{"start":158.08,"text":"Describing economic growth as “low and uneven”, the Bank of Thailand’s assistant governor for monetary policy Don Nakornthab said on Wednesday that rates could still be cut in a crisis but acknowledged that his institution was “almost at the limits” of what monetary policy could do to boost growth. He said targeted financial measures by the central bank and fiscal stimulus by the government were needed to accelerate economic expansion."}],[{"start":180.96,"text":"Demographics are part of Thailand’s Japanification risk. The birth rate is at a 75-year low, while according to the World Bank the total fertility rate is at 1.2 children per woman, below the 2.1 required for a stable population."}],[{"start":195.382,"text":"Experts have predicted the population could shrink from 67mn to 30mn in the next 50 years and government officials and analysts warn of risks to growth."}],[{"start":null,"text":""}],[{"start":205.225,"text":"“Thailand since before Covid has seen its working-age population shrink outright, and that’s just a story of low structural growth going forward. That tends to mean low inflation and by extension low interest rates,” said Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics."}],[{"start":222.534,"text":"Thailand’s economic and demographic issues are similar to Japan and South Korea. However, Thailand is greying before achieving developed-nation status. Its population of over-65s doubled between 2000 and 2020, and is expected to double again by 2040 to about 26 per cent of the total population, according to the World Bank."}],[{"start":243.44,"text":"“We will become old but not rich. We are following the trajectory of an advanced economy without having achieved the level of income that usually warrants this,” said Burin Adulwattana, an independent economist."}],[{"start":254.4,"text":"Adding to the demographic problem is a high level of debt. Thailand’s household debt stands at 86 per cent of GDP, the highest among upper middle-income countries in the world, according to HSBC, with consumers using loans to fund daily expenses amid slowing economic and wage growth."}],[{"start":null,"text":""}],[{"start":270.4,"text":"“A big portion of household incomes is usually put aside to be able to pay the principal of their debt. So that has constrained consumption,” said HSBC’s senior Asean economist Aris Dacanay."}],[{"start":281.68,"text":"This had a ripple effect on businesses and investment, with companies holding back expansion plans as they could not rely on local demand or pass on rising costs to consumers, he added."}],[{"start":292.914,"text":"Economists say the high debt load has reduced the efficacy of low rates in stimulating inflation and growth."}],[{"start":299.857,"text":"“The policy transmission is broken essentially in Thailand, so a lot of the support has to come increasingly from the government in terms of fiscal support going forward,” said Oxford’s Loo."}],[{"start":309.93,"text":"That had been a factor for countries to escape Japanification, she said. In Japan, for instance, former prime minister Shinzo Abe launched massive government spending and pushed for aggressive monetary easing to help the country out of its long disinflationary spiral."}],[{"start":325.28,"text":"But economists say Thailand lacks the fiscal space to do so. They expect the government to start winding down some stimulus programmes from next year as its public-debt-to-GDP ratio approaches a self-imposed limit of 70 per cent."}],[{"start":338.56,"text":"“This fiscal retrenchment is necessary, and because of that, growth will be slow. And because growth will be slow, monetary policy needs to compensate for that,” said Dacanay, who expects the central bank to hold the 1 per cent rate until the end of next year."}],[{"start":353.28,"text":"Thailand’s demographic issues and the challenges to its export-led growth had made it harder for it to grow at more than the low single digits it was currently reaching, said Pantheon’s Chanco."}],[{"start":364.08,"text":"“The longer Thailand sort of dithers on reform, the more it loses ground to its competitors regionally.”"}],[{"start":364.58,"text":"Data visualisation by Haohsiang Ko in Hong Kong"}],[{"start":377.2,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1787822922_1863.mp3"}