Long-term Saving in Thailand: Are we saving enough and what are the risks?

This paper seeks to gain a better understanding of the saving process in Thailand, given its important implications on the future path of the current account, capital stock accumulation, and growth. As the current account may continue to register a deficit in the next couple of years, there will be more and more questions from policymakers on how to lessen the pressure on the current account by increasing the level of domestic saving. This paper will seek to understand the dynamics of savings at both the macro and micro levels. Using current cross-sectional data, we find pockets of under-savers at the household level, particularly households with low income and low education. We find that the fall in household savings to GDP has been due to the rise in household consumption propensity across all cohorts. We also analyze the implications of demographic trends on household savings in the medium-term. At the macro level, we find that the household savings rate partly depends on the real interest rate. Furthermore, we find that the present saving rate is not adequate for maintaining both growth and current account stability. We conclude with a discussion of the policy implications. Given the increased need for saving at the macroeconomic level and the potential for households to save more, policymakers should design savings schemes focusing on households. In particular, we address how government agencies may promote more long-term saving? Among which groups? And what are the appropriate policy tools? Given the multifaceted nature of savings, an enlightened savings policy should serve to promote both macroeconomic stability and household sector welfare. Indeed, as the pressure on the current account increases in the coming years, policymakers will find that the two goals are not necessarily contradictory. Aggregate saving can be increased through targeting household saving without impinging on household welfare.