Is LOS Japan 25 years ago?

[reader]

From The Economist

 

Once the wildest of emerging markets, Thailand is ageing fast. Its economic policymakers need to change course

 

TWENTY years ago Thailand was the most torrid of emerging markets. After a spell of overheated growth and wide current-account deficits, it had exhausted its foreign-exchange reserves and lost its currency’s peg to the dollar. In the aftermath, inflation approached 10% and the Bank of Thailand (BoT) struggled to restore confidence in the baht. In a widely cited paper by Romain Rancière of the University of Southern California and two co-authors, Thailand was used as a stark illustration that dynamism and danger, fast growth and occasional crises, went hand in hand.

 

A few of today’s emerging markets can still set the pulse racing—Turkey, for example, has combined breakneck growth with double-digit inflation and a worrying slide in the lira. But Thailand is not one of them. Private investment expanded by only 1.7% last year. Thailand’s sovereign bonds yield less than America’s. Inflation is once again a worry, not because it is too high, but because it is so stubbornly low. Consumer prices rose by only 0.8% in March, according to figures released this week. Inflation has remained below the BoT’s target range of 1-4% for 13 months in a row. Core inflation, excluding raw food and energy, has been below 1% for almost three years.

 

“It’s Japan,” says one veteran observer of Thailand’s economy. “It’s got Japan’s demographics from 25 years ago, [and] it’s on the Japanese path of zero inflation, very low interest rates and a big current-account surplus.” By 2022 Thailand will be the first developing country to become an “aged” society, according to the BoT, with more than 14% of its population over 65. The proportion of elderly is rising faster in Thailand than in China.

 

But a grey future is no excuse for a sedentary present. Thailand’s demography should instead impart a sense of economic urgency. The country should be investing in infrastructure and machinery to ensure that tomorrow’s smaller workforce is well equipped to provide for a large population of pensioners.

 

Unfortunately, Thailand’s economic policymakers also exhibit some of the macroeconomic passivity that once paralysed Japan. The BoT has not cut interest rates since April 2015. At the BoT’s most recent meeting one member even voted for an increase, lest people grow too accustomed to easy finance.

 

Continues at

https://www.economist.com/news/finance-and-economics/21739976-once-wildest-emerging-markets-thailand-ageing-fast-its-economic

[Guest]

1  Nothing wrong with that.     Inflation between 0 & 1%.

 

2 Thailand is not like Japan 25 years ago.

On the positive side, Japan was recovering from the extreme bubble in Japanese asset prices of the late 1980s at that time.   Thailand has no such issues today.

 

On the negative side, Thailand has an inferior education system and more corruption.

 

Demographic issues seem similar.   

 

It could be smart to allow some selective immigration from Cambodia, as long as there are measures to integrate the new arrivals into Thailand.