Allianz sees Thai economic stability remaining sound

Despite the insurance market losing momentum for the fourth year in a row, premium income reached 4.9 per cent of GDP, putting Thailand on par with Germany in terms of insurance market penetration, Allianz said this week in a press release. 
Against the background of an ageing population, Thailand’s old-age dependency ratio is set to leap from 15.2 per cent today to 52.5 per cent in 2050. Allianz expects life-insurance growth to remain the major growth driver over the next decade, averaging around 9.3 per cent. 
Overall, global output is likely to expand by about 2.8 per cent in 2017. Industrialised countries are expected to register gross domestic product growth of 1.9 per cent, while in emerging markets growth could increase to 4.1 per cent.
Dr Michael Heise, chief economist at Allianz SE Germany, the major shareholder of Allianz Ayudhya Assurance, says Thailand’s strong competitive advantages – such as competitive prices and strategic location – and rising foreign demand will support a rise in exports and tourism-related revenues. With public debt at 43 per cent of GDP (lower than the 60 per cent public debt ceiling), the existing fiscal space will be used to support growth in the form of public investment, he believes. 
As for the Thai insurance industry, Heise notes that the market has been losing momentum since 2012. For the fourth year in a row, life and property/casualty insurance-premium growth slowed further to 3.9 per cent in 2016. 
According to preliminary figures, p/c insurance recorded negative growth for the first time since 1999, while life insurance growth picked up slightly to 6.6 per cent.
Regarding per capita spending, which amounted to Bt10,290, Thailand lost its lead and is now level with China, which closed the gap thanks to a 23.1-per-cent surge in insurance premiums last year.
Life insurance makes up 70 per cent of total insurance premium income. This is in line with the results of a World Bank survey, in which 65 per cent of all adult respondents said they saved for old age. 
A recovery of the economy should also spur p/c insurance growth, where Heise sees potential for average growth of 7.5 per cent a year up to 2027.
Heise adds that, although the share of life insurance and pension assets continues to increase, bank deposits still dominate households’ financial assets portfolio, with a share of around 42 per cent. 
In 2015, total gross financial assets of Thailand’s households amounted to 413 billion euro, corresponding to an average 6,070 euro per capita. 
In a regional comparison of gross financial assets per capita, Thailand ranks in the lower third, below China and Malaysia but still ahead of Indonesia and India. 
With regard to indebtedness, Thai households had one of highest debt ratios in the region in 2015, namely 81.6 per cent.
Heise says the world economy is in fairly good shape and has made a positive start to 2017. The global output is likely to expand by about 2.8 per cent this year, compared with 2.5 per cent in 2016. Industrialised countries are expected to register gross domestic product growth of 1.9 per cent, while in emerging markets growth could increase to 4.1 per cent from the 3.7 per cent seen in 2016.
In industrialised countries, growth prospects are quite favourable overall. 
In the United States, the new US administration’s stance across a wide range of policy areas remains uncertain. But given the complexity of the legislative and budgetary process, it appears increasingly unlikely that any major fiscal or tax proposals will already take effect during 2017. 
Also, in part, against this backdrop, upward pressure on the US dollar has subsided, which improves the outlook for US exports. All in all, the US economy is likely to expand by slightly more than 2 per cent this year. 
In the Eurozone, the economic recovery looks set to continue. Allianz expects real gross domestic product to increase by 1.7 per cent. While the pickup in oil prices and rising inflation will weigh on private consumption, household spending will be supported by rising employment. The group of emerging market economies is set for a moderate acceleration of growth, driven mainly by a gradual stabilization in the group’s heavyweights, Russia and Brazil, and by a recovery in commodity-exporting countries.
Meanwhile economic growth in emerging Asia is likely to prove resilient in both 2017 and 2018. Allianz expects annual real GDP growth to rise by 6 per cent this year and drop slightly to 5.7 per cent in 2018. The region is set to contribute around 50 per cent to global economic growth.
GDP growth is underpinned by “slower but still robust” growth in China (6.7 per cent in 2017), firm economic growth in Asean-5 (4.6 per cent) and India (around 7 per cent). 
On the demand front, stars are aligning gradually. Domestic demand remains a key driver with solid growth in private consumption and favourable fiscal policies. Exports are gaining traction supported by a rise in global demand. 
Signs of reflation are broadening with producer prices in expansion territory. Currencies are stabilising and regional central banks have more leeway to focus on improving financial stability.
“Yet downside risks still prevail, stemming from potential negative spill-overs of monetary tightening in the US and China on global demand and global financial flows, a radical shift in trade policy orientation in the US, and higher geopolitical risks,” Heise says.