865 billion baht loan needed to stimulate economic growth


Finance Minister makes the case for increased borrowing in fiscal 2025 but assures House of Representatives fiscal discipline will be maintained

Deputy PM and Finance Minister Pichai Chunhavajira told the Parliament on Wednesday that the proposed borrowing of 865 billion baht to offset the deficit in fiscal 2025 budget bill is necessary to revive the sluggish economy and ensure that Thailand’s GDP can still expand to meet the target.

He also assured lawmakers that the loan will strictly be within the framework of the government’s fiscal discipline.

The House of Representatives started deliberating the fiscal 2025 budget bill on Wednesday. The bill seeks to allocate 3.7 trillion baht to government spending against a projected revenue of 2.8 trillion baht.

The planned spending will include 2.7 trillion baht for fixed expenditures, 908 billion baht for investments and 150 billion baht for loan repayments.

The government would borrow 865 billion baht to offset the deficit, which will make the deficit ratio higher than for fiscal 2024. However, the government planned to allocate a larger portion to investments to stimulate future economic growth.

“We need to borrow 865 billion baht in order to fix the economy that has been growing only marginally since the 1997 Tom Yum Kung crisis,” Pichai said. “The Thai economy used to grow by two digits, but since Covid-19 it has only expanded by 0.4% annually. This is an abnormal condition.”

The finance minister pointed out that Thailand suffered from structural problems that were leading to declining competitiveness both in the industrial sector, which remains in the original products, and in agriculture, which has high costs.

“However, driving Thailand towards a digital economy or green economy cannot be achieved in a short period of just 6 months or a year,” he said. “The government has planned its budgeting for the short, medium, and long terms to drive the country's economy to grow higher than the average in the past and eventually surpass neighbouring countries."

“Despite the budget deficit, fiscal discipline will be maintained within a framework that is both robust and explainable,” he said.

Pichai went on to explain that short-term measures will aim to address slow domestic spending due to increasing household debts. This can be done by increasing the public’s access to loans of state financial institutions such as the Government Savings Bank, which can offer up to 4 trillion baht, as well as coordinating with the Bank of Thailand to invite commercial banks to join the cause.

“Furthermore, financial measures will be implemented to restructure people’s debts, preventing them from becoming non-performing loans (NPLs) and thus improving their credit records, enabling the public to access legal loans in the future,” he said.

Pichai added that these short-term measures, along with government’s economic stimulus measures such as the digital wallet scheme, could potentially raise the projected economic growth from an initial estimate of 2.5% this year to a target of 3%.

“Budget deficits are necessary to stimulate the economy, while fiscal discipline must also be maintained. We may need to increase deficits over the coming years to enhance competitiveness and employment. Eventually, as the economy expands and state revenue increases, public debt is expected to decline starting in 2027,” said Pichai.

From 2026 onward, government revenue growth will outpace expenditure growth, gradually reducing fiscal deficits, he said, adding that the pressure from public debt will also gradually decrease.

“The government will prioritise short-term issues such as public welfare and long-term structural adjustments of the economy. This will be achieved through responsible and sustainable fiscal and monetary policies, with the aim of elevating economic growth beyond past averages and surpassing neighbouring countries,” Pichai said.