BOT worried about populist policies pushing up public-debt level
The Bank of Thailand has expressed concern over the country's public-debt level if the government continues its budgetary deficits, particularly for its populist policies.
Mathee Supapongse, BOT senior director at the Macroeconomic and Monetary Policy Department, said that if the government continued its budget deficits with the aim to stimulate expenditure through non-value-added populist policies, Thailand’s public debts could rise continuously.
Such a populist policy may lead to problems for the government’s specialised financial institutions, including the Government Savings Bank, Bank for Agriculture and Agricultural Cooperatives, as most projects are executed through them.
"The public debt level remains within the fiscal framework. However, if the government continues its budget deficit and non-value-added policy without upgrading the nation’s capabilities, it is believed that will raise the debt level. The point is that the government may need to have a balanced budget with a focus on infrastructure investment for the nation’s economic stability in the long term," Mathee said.
The Thai economy is forecast to grow 4.6 per cent in 2013, likely driven by domestic demand. Risks to growth exist with uncertainties about the economic powers’ economic recovery. Such risks include solutions to the US "fiscal cliff", the European sovereign debt crisis, change of leadership in Japan and China.
Domestic risks lie in the economic instability, an increase in the daily minimum wage to Bt300 across the nation on January 1, 2013, and possible delays in government expenditure on mega-projects.
Thai exports will likely expand 8-9 per cent in the latter half of next year.
Roong Mallikamas, BOT director at the Macroeconomic Policy Office, said that all agencies needed to cooperate to develop the services industry’s capability as it was a large industry with high value creation to the country. Skill development and language improvement need to be strengthened for the Asean Economic Community (AEC), which will take shape in 2015.
"Development of services is not easy but we need to do it, particularly technology and creativity. The workforce also needs to have sufficient quality," Roong said.
Alisara Mahasandana, BOT senior director for Financial Markets Department, said that the baht’s movement had not changed much from the earlier period, although the Bank of Japan had announced it would purchase more assets.
Yesterday, the central bank's Monetary Policy Committee and the Financial Institutions Policy Committee convened the second joint meeting.
