By The NATION
Thailand has run fiscal deficits for many years since the 1997 Asian financial crisis. Even in recent times, the junta-backed government ran fiscal deficits of Bt552.9 billion, Bt550 billion and Bt450 billion in fiscal years 2017, 2018 and 2019 respectively. In order to maintain fiscal sustainability, the Finance Ministry has a plan to achieve a balanced budget by 2030.
“If the new government aggressively implements welfare projects, the goal of achieving a balanced budget is expected to be delayed further,” said Pisit Puapan, senior expert on macroeconomic policy at the Fiscal Policy Office.
Political parties in their election campaigns have wooed voters with offers of generous welfare benefits. Phalang Pracharat, which will lead the coalition government, has promised to continue and inject more funds into state welfare card projects initiated by the junta-backed government. The programme was introduced by former ministers who are now leading members of the Phalang Pracharat Party. Currently 14.5 million cardholders get monthly grants from the government.
“Although more welfare spending may delay the cause of a balanced budget but it is unlikely to adversely affect fiscal sustainability in the next 5-10 years,” said Pisit.
He was optimistic the new government will still have fiscal space to drive the economy. For fiscal sustainability, the public debt level has been set at 60 per cent of gross domestic product (GDP) while the current public debt stands at 42 per cent of GDP. “There is still an 18 per cent cushion to remain in the sustainability zone,” he said.
Budget may be delayed
Meanwhile, the annual budget for fiscal 2020 is expected to be delayed by 3-4 months and that could adversely impact some new public investment projects, as the budget plan set by junta-backed government is to be reviewed by the new coalition government.
The Budget Bureau recently said that state agencies could propose their annual spending plans to the bureau by July and the government expenditure plan would be forwarded to the new Cabinet for approval. The draft budget bill is expected to be debated by the lower house in September in its first reading with the second and third readings in December before it is forwarded to the senators for consideration.
General Prayut Chan-o-cha’s administration has set new expenditure plans, scheduled to kick off in October this year, estimated at Bt3.2 trillion with a deficit of Bt450 billion.
A delay by a few months could lead to a postponement of capital spending of some new public investment, said Pisit. But it would not have much effect on the economy as the government could speed up spending later.
The Finance Ministry recently revised down its economic growth projection for the year to 3.8 per cent, down from the 4 per cent projected earlier. The new government is expected to take shape this week after Parliament last week voted General Prayut as prime minister under the newly elected government.
Democrat MP Korn Chatikavanij said the new expenditure plan may not be much different from the one set by the previous junta-backed government. The new government could later introduce a mid-year budget to finance new projects if needed, he suggested.
The Finance Ministry had earlier said that officials were working on a new stimulus package in order to boost consumption to compensate the negative impact from falling exports.