Govt must focus on fiscal policy for economic boost: academic
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Fiscal policy is the only tool that the government can utilise to boost the economy in the second half of the year as leading indicators point to a slowdown, Thammasat University economics professor Sakon Varanyuwatana said yesterday.
The outlook in the consumption, export, investment and financial sectors is not bright, with the May growth rate in each of these areas being in negative territory, he said.
Over the first five months of the year, rubber export came in at Bt107 billion and that of rice at Bt53 billion. Sakon also touched on the issue of treasury discipline, with the government aiming to balance budget cash balances by 2017.
“It is meaningless if the government increasingly seeks non-budget financing,” he said.
Moreover, fiscal space – simplified as the difference between governmental revenues and fiscal budget expenditures – is significant for government investment projects, he said, adding that it has gradually declined, from Bt164.5 billion last year to Bt146.5 billion this year.
With the government having spent about 57.47 per cent of the budget in the first eight months of the current fiscal year, “the rest has to be managed carefully to boost the economy efficiently and effectively”, he stressed.
He forecasts that the gap will narrow further to Bt126.2 billion in the 2014 fiscal year. Populist projects, such as the rice-pledging scheme, are tremendous burdens on the fiscal budget, accounting for about Bt500 billion, which obstructs investment in other sectors that could boost the economy, he claimed.
Meanwhile, in the first eight months of the fiscal year, the Revenue Department recorded revenues of Bt1.1 trillion, 2.7 per cent above target, while the Excise Department’s revenues came in at Bt302.3 billion, 9 per cent above target. Sakon warned that these figures did not, however, reflect net income, as the Excise Department has to return tax under the first-car scheme.
To achieve 4-per-cent growth in gross domestic product this year, the academic said the government would need to pump additional investment of around Bt65.57 billion into the economy, which suggested that such a growth rate would be hard to achieve.
Moreover, cooperation between the treasury and finance arms of government is crucial in terms of reviving the confidence of investors and, in turn, the economic outlook, he said. Otherwise, Thailand will miss out on the opportunity to develop, and the quality of life of Thais will remain at a low level, he suggested.
