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This Asian nation faces a growing crisis from aging

Jeff Hutchens | Getty Images News | Getty Images

While most of Southeast Asia is expected to enjoy relatively young populations in the decades ahead, one country appears to be bucking the trend in a big way.

Thailand, the region's second-biggest economy after Indonesia, is aging rapidly and economists say not enough is being done to prepare the country for the demographic change taking place.

(Read more: The aging in Asia face a new decade like no other)

The United Nations (U.N.) expects Thailand's working-age population, those aged between 15 and 64, to peak in 2017. Its data show that 8.9 percent of the population was aged 65 and over in 2010. This is projected to increase to 19.5 percent in 2030.

"Thailand's aging demographic is very serious and there is a sense that this is not being discussed at the policy level," said HSBC ASEAN economist Su Sian Lim.

"If you look at the U.N.'s population projections, the working-age population will decline as early as 2017 – that has very significant growth implications," she said. "The productive part of the labor force is disappearing."

An aging population can have important long-term consequences for an economy – from pressure on state finances and the health care system to lower economic growth rates if the workforce is not large or productive enough to support retirees.

Old man

According to BofAML, Thailand is the only country in Southeast Asia that will join the ranks of Northeast Asian countries such as China and Japan in seeing their working-age population shrink over the next decade.

(Read more: China's solution to elderly neglect: Sue your kids)

In short, BofAML analysts believe Thailand has emerged as the "old man" of Southeast Asia.

"We have been used to seeing developing economics such as Thailand growing at annual rates of 5 to 6 percent – that growth would be in question with an aging demographic," said Seng Wun Song, regional economist at CIMB Bank in Singapore.

Economists attribute a successful contraception program introduced in Thailand in the 1970s for the falling birth rate, which means fewer working-age people in the future.

Thailand's fertility rate declined to 1.6 percent in 2011 from 2 percent in 1992, near developed peers such as Singapore, which has a fertility rate of about 1.2 percent, and well below levels seen in the Philippines and Indonesia.

(Read more: For Western retirees, the Asian lure is hard to resist)

It's not the only country grappling with an aging society: Japan, China, the U.S. and much of Europe is in the same boat.

The Singapore model

Analysts say Thailand urgently needs to implement policies that address the declining population in the same way that Singapore has done in recent years.

Singapore also faces an aging population and low birth rate but has worked to offset this in recent years through steps such as ramping up migration. Those policies mean Singapore's population is expected to peak later than its regional peers.

(Read more: Singapore: A Wealthy Nation That Can't Afford to Retire)

In August, the Thai National Economic and Social Development Board urged the government to draw up a family-development plan to cater for a highly dependent population after 2040 and to promote sufficient retirement savings, local newspaper 'The Nation' reported.

It says that by 2040, a quarter of the Thai population could be over the age of 65.

"I'm sure we can do better," said Supavud Saicheua, head of research at Thailand's Phatra Securities, talking about measures taken to support an aging population.

"There is now universal healthcare and benefits are being expanded from a social security system set up several decades ago," he said. "Industrial workers and civil servants have pension funds. But over 20 million workers in the agricultural and informal services sectors do not have such schemes and it is likely that they will not have enough savings to retire on."

(Read more: Are Asia retirees missing out on a key savings tool?)

Rotjana Patikarapong, who left Thailand five years ago and lives in Singapore with her family, says she would not consider returning home to retire.

"We don't have a system like the CPF in Singapore and there doesn't seem to be a policy about caring for the elderly," she said, referring to Singapore's Central Provident Fund – a compulsory savings scheme that citizens can use for retirement, housing or healthcare.

Analysts say one option for Thailand to address the aging population quickly is to encourage more migration. Reforming the education system to produce a more productive labor force is another area the government should look at more closely, they add.

"There is a lot of room to increase labor productivity – reform of education to produce the right manpower is something that is long overdue," said Phatra Securities' Saicheua.

Whatever the government does it needs to do quickly, added HSBC's Lim.

"The longer you leave it the harder the problem of addressing an aging population becomes," she says. "And Thailand has left it very late."

—By CNBC.Com's Dhara Ranasinghe; Follow her on Twitter @DharaCNBC

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