Thailand to reduce fiscal deficit to below 3% of GDP by 2029
Finance Minister Ekniti Nitithanprapas reveals that the fiscal policy committee to propose a medium-term fiscal plan to the Cabinet next week, aiming to reduce the deficit below 3% by 2029, with significant deficit reduction in the 2027 budget
- Thailand's government has approved a Medium-Term Fiscal Framework (MTFF) with the primary target of reducing the national fiscal deficit to below 3% of GDP by the year 2029.
- This plan is designed to enhance fiscal discipline and restore confidence in the country's financial management, partly in response to recent credit outlook downgrades from Fitch and Moody's.
- To achieve this, the government will not raise the public debt ceiling, ensuring it remains below 70% of GDP, and will implement stricter rules on spending, loan repayments, and fiscal transparency.
- The framework includes accountability measures, requiring any future government that fails to meet the 2029 target to compensate by either increasing revenue or reducing expenditure.
Deputy Prime Minister and Finance Minister, Ekniti Nitithanprapas, on Thursday (November 13), chaired the meeting of the Economic and Financial Policy Committee in place of the Prime Minister.
The meeting approved the Medium-Term Fiscal Framework (MTFF), which will be presented to the Cabinet on November 18. The goal of the MTFF is to enhance fiscal discipline and confidence in the country's fiscal management.
A key target is to reduce the fiscal deficit to no more than 3% of Gross Domestic Product (GDP) by 2029.
The meeting included representatives from four key economic agencies: the Bureau of the Budget, the National Economic and Social Development Council (NESDC), the Ministry of Finance, and the Bank of Thailand. The MTFF was thoroughly discussed to ensure it aligns with the country's fiscal strategy.
Ekniti highlighted that the plan's primary objective is to build trust in Thailand's fiscal position.
He further stated that the government places high importance on maintaining fiscal discipline through its “Quick Big Win” policy, which consists of five pillars and one foundation aimed at preserving fiscal stability.
This follows a downgrade of Thailand’s credit outlook from stable to negative by two major credit rating agencies, Fitch Ratings and Moody's, earlier this year.
The MTFF will serve as a signal of Thailand’s commitment to fiscal discipline, with a clear objective of reducing the fiscal deficit to below 3% of GDP by 2029.
To maintain fiscal stability, the committee also confirmed that it would not raise the public debt ceiling, ensuring that public debt remains below 70% of GDP.
The MTFF sets out a gradual reduction in the deficit, with the goal of achieving a deficit below 3% by 2029. This includes a significant reduction in the budget deficit for the 2027 fiscal year compared to the current budget, where the budget deficit for the 2024 fiscal year is projected to be 4.4% of GDP.
Three Key Approaches to Strengthening Fiscal Discipline
The Finance Minister outlined three key approaches to strengthening fiscal discipline through the MTFF:
- Clear Fiscal Management Guidelines
The government will establish clear and concrete guidelines for managing revenue, expenditures, debt, and assets to ensure fiscal discipline.
- Enhancing Fiscal Transparency
There will be improvements in fiscal regulations to increase transparency, particularly regarding fiscal costs. This includes reporting on lost revenues due to tax incentives and measures, such as the tax benefits provided by the Board of Investment (BOI).
- Strengthening Semi-Fiscal Measures
The framework will also focus on increasing clarity in managing the fiscal burden caused by semi-fiscal measures, as outlined in Section 28 of the Fiscal Responsibility Act. This will involve stricter approval processes, aligning them with the scrutiny given to the central budget.
Furthermore, the committee has revised fiscal regulations to tighten rules without amending the Fiscal Responsibility Act. For example, the proportion of central budget expenditures will be reduced from 2-3.5% to 2-3%, and the repayment of loans will be set at no less than 4%, compared to the previous range of 2.5-5%. The ratio for multi-year commitments, as per Section 42 of the Budget Procedure Act, will be reduced from 8% to 5%.
Ekniti assured that these fiscal measures would not affect investment budgets. The government will continue supporting sustainable economic growth through fiscal tools that do not contribute to public debt, such as the Thailand Future Fund (TFF) and Public-Private Partnerships (PPP) for long-term investment.
Regarding whether the new government could adjust the MTFF, Ekniti emphasised that the framework will include provisions to ensure accountability. If any government fails to meet the target of reducing the fiscal deficit to below 3% of GDP by 2029, compensatory measures will be required, such as increasing revenue or reducing expenditure.
The detailed figures of the MTFF will be revealed after it is presented to the Cabinet, with further discussions on the 2027 budget framework to follow. The final budget proposal will be submitted to the Cabinet on November 25, 2025.
