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Thailand to run fiscal deficit until 2025

  • Dec 23, 2020
Thailand plans to run a fiscal deficit until 2025, to combat projected low tax revenue from low economic growth, while targeting inflation of 1 to 3 per cent next year.

The Cabinet on Tuesday gave the nod to the inflation target set by the Finance Ministry and Bank of Thailand’s Monetary Policy Committee (MPC), said government spokesman Anucha Burapachaisri.

The target was set in line with economic conditions including inflation dynamics, Thailand’s ageing society, fast-changing technology, and uncertainty caused by the Covid-19 pandemic.

The MPC has retained its priority to support economic recovery together with maintaining stability of prices and a sound financial system, he said.

The Cabinet also approved a medium-term government spending plan for 2022 to 2025, proposed by the Finance Ministry, said Anucha.

The Finance Ministry projects the Thai economy will expand in a range of 2.7 to 4.2 per cent over that four-year period. Thailand has experienced slow economic growth of 3 to 4 per cent in recent years, while the Covid-19 crisis is forecast to bring a severe economic contraction this year.

The Finance Ministry’s medium-term spending plan exceeds projected revenue as government spending remains an important factor in driving the economy, given low tax revenue.

For fiscal year 2022, the government plans to spend Bt3.1 trillion against projected revenue of Bt2.4 trillion, resulting in budget deficit of Bt700 billion. 

For 2023, spending will be Bt3.2 trillion against Bt2.49 trillion revenue, while for 2024 it is Bt3.31 trillion against 2.62 trillion revenue, and in 2025, Bt3.42 trillion against revenue of 2.75 trillion. Thailand has run a fiscal deficit since the 1997 Asian financial crisis. 

Projected key sources of tax revenue between 2022 and 2025 include VAT, e-service tax collected from international tech giants, licensing of frequencies for telecom operators, and production sharing contracts from oil and gas exploration firms.

The ministry also projects a rise in public debt as the government will need to borrow more to finance the deficit.

Public debt this year has hit Bt7.85 trillion, accounting for 49.3 per cent of gross domestic product (GDP).

Public debt to GDP is projected to rise to 56 per cent next year, 57.6 per cent in 2022, 58.6 per cent in 2023, 59 per cent in 2024 and 58.7 per cent in 2025.

Historically, the Finance Ministry has set a limit of 60 per cent on public debt-to-GDP, in order to ensure fiscal sustainability.

“For the short and medium term, the fiscal plan aims to increase both revenue and spending in order to brace for future risks. While for long-term planning, the budget deficit will be narrowed to achieve fiscal balance eventually,” said Anucha.

Slower economic growth and the Covid-19 fallout has contributed to rising public debt in recent years.

Source: https://www.nationthailand.com/business/30400049?utm_source=category&utm_medium=internal_referral