NESDC projects a welfare deficit in Thailand by 2031 without reform

Thailand's social protection system is under growing pressure as the country moves towards a super-aged society, increasing the burden on welfare budgets.

Fragmented welfare provision and limited fiscal room have made better preparation and more efficient management of the system an urgent policy priority for long-term fiscal sustainability.

The latest report on social budgets and fiscal risk prepared by the Office of the National Economic and Social Development Council (NESDC) finds that Thailand's social protection expenditure continues to grow faster than revenue.

Without changes or structural reform, the system's overall budget is projected to enter deficit by 2031, principally because of Thailand's transition towards a super-aged society and heavy reliance on government subsidies.

Social protection spending reached THB1.40 trillion in 2024

NESDC data for 2012–2024 show that social protection spending rose from THB0.61 trillion to THB1.40 trillion, representing average compounded annual growth of 7.3%.

Revenue increased more slowly, at 6.6% a year, from THB0.73 trillion to THB1.57 trillion.

Spending also grew significantly faster than the economy, rising from 4.96% of gross domestic product (GDP) in 2012 to 7.50% in 2024.

Thailand's social protection expenditure is concentrated in two categories driven by demographic change: retirement and death benefits, which account for 41.29%, and health, at 32.64%.

Together, they represent almost three-quarters of total spending.

By economic classification, income replacement payments transferred directly to beneficiaries make up 58.28%, while benefits provided as goods and services account for 40.72%, making cash welfare the main form of expenditure.

Government funding supplies 78.6% of welfare revenue

Social protection revenue in Thailand grew steadily over the 13 years from 2012 to 2024, increasing from THB0.73 trillion to THB1.57 trillion at a compound annual growth rate (CAGR) of 6.6%.

However, the composition of that revenue reveals significant structural vulnerability.

Government subsidies provide 72.8% of Thailand's social protection revenue.

Including government contributions to various funds raises the state's share to 78.6%, or almost four-fifths, while contributions from insured members and employers account for only 13.6%.

NESDC says this structure leaves the government carrying most of the system's financial burden and limits its capacity to pursue other policies.

The vulnerability of Thailand's welfare revenue structure became clear during the coronavirus disease (COVID-19) crisis in 2020–2021.

Revenue from contributory schemes fell sharply as private-sector employment declined, unemployment rose, and the government repeatedly reduced Social Security Fund contribution rates to ease the burden on employers and insured members.

The government consequently had to subsidise Thailand's welfare system to replace lost revenue and maintain existing benefit levels.

NESDC views this experience as evidence that the system lacks the resilience needed to absorb external shocks.

Pension and healthcare costs rise

For retirement and death benefits, the NESDC report identifies three main cost drivers.

First, public-sector pensions accounted for 66.2% of total pension and lump-sum retirement payments in 2024, with the 2015 “Undo” policy involving the Government Pension Fund (GPF) pushing expenditure up by more than THB76 billion.

Second, the report identifies the Social Security Fund's entry into a phase of full benefit payments in 2014, when the first generation of insured members had completed 180 months of contributions and reached age 55.

Third, the elderly allowance covered 85.13% of older people.

In healthcare, the NESDC report finds that treatment costs per person rise rapidly after age 60, particularly for chronic non-communicable diseases such as diabetes, hypertension and cancer.

The National Health Security Fund, which covers more than 47 million people, uses fixed payments per person to control costs.

However, the Civil Servant Medical Benefit Scheme still reimburses actual expenses for many items, which the report says encourages unnecessary use of services and leaves per-person spending on civil servants higher than for the general population.

Expanded welfare benefits create lasting fiscal commitments

NESDC also warns of a fiscal “ratchet effect” from expanding cash benefits, including the increase in the disability allowance from THB600 to THB800–1,000 a month and the rise in grants for newborn children to THB600 a month.

Once the government extends benefits, permanent expectations develop.

Subsequent reductions or withdrawal face political and social resistance.

These benefits become recurring expenditure commitments that reduce the fiscal room available.

Demographic and fiscal conditions are intensifying pressure on Thailand's welfare system.

The share of people aged 60 and over rose from 13.18% in 2010 to 20.17% in 2023, when Thailand became a fully aged society.

The country is expected to become a super-aged society in 2034, with this age group accounting for 28.09% of the population.

The proportion of Thailand's working-age population, aged 15–59, is projected to fall from 67.00% to 55.83% by 2040.

Outstanding public debt stood at THB12.9 trillion in May 2026, equivalent to 66.8% of GDP, and is projected to reach 68.2% of GDP in 2030, close to the 70% ceiling.

NESDC's 15-year projection covering 2025–2040 puts revenue at THB1.92 trillion in 2040 under the baseline scenario with no changes.

That is just 1.22 times the 2024 level, reflecting a shrinking working-age population and a 1.0% limit on government subsidy growth applied in all scenarios, in line with the medium-term fiscal plan for fiscal years 2027–2030.

Spending in 2040 is projected at THB2.37–2.76 trillion and is expected to grow faster than revenue.

The baseline scenario produces the earliest deficit, beginning in 2031.

NESDC proposes four welfare reforms

NESDC proposes four responses.

The first is to rebalance provision towards a multi-layered welfare system.

The state would provide basic protection such as the elderly allowance while promoting second-pillar supplementary pensions linked to employment and based on defined contributions, together with third-pillar voluntary personal savings for those able to save.

The second is to control healthcare costs through value-based healthcare (VBHC), including fixed payments by disease, an emphasis on prevention, taxes on products harmful to health and incentives for people to change their behaviour.

The third NESDC recommendation is to restructure revenue and expand fiscal room by bringing informal workers, gig workers and the self-employed into contributory schemes.

Incentives and flexible contribution arrangements would reflect employment status and ability to pay, alongside a review of the tax structure and new tax bases.

The fourth NESDC recommendation is to improve welfare delivery by accelerating development of a system linking individual welfare records with income data, tax histories and benefit receipt.

The aim is to reduce overlapping assistance, gaps in coverage and leakage.