Public Debt in Thailand

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Government announces mildly expansionary FY 2021 budget amid ongoing political turmoil

On 21 September, the Senate approved the government’s national budget bill for fiscal year 2021 (October 2021–September 2022). Public spending is seen rising slightly from 2020’s original level, with revenues set to fall as the economy reels from the pernicious impact of the coronavirus pandemic. As a result, the fiscal deficit is projected to widen slightly. The economic upshot is a budget which should be mildly supportive of growth. However, the slow implementation of expenditure throughout FY 2020 is likely to continue into the next fiscal year, limiting any boost to the economy, while ongoing political unrest raises further questions over the government’s ability to execute its spending plans.

Total spending for FY 2021 is set to increase to THB 3,285 billion (around USD 105 billion; 2020 figure: THB 3,200 billion), with revenues at THB 2,662 billion (2020 figure: THB 2,731 billion), yielding a budget deficit of 7.0% of GDP, which is up from FY 2020’s projected 6.7%. Looking at the details of the budget allocation, measures to develop the country’s competitiveness received a significant boost in funding, mainly reflected in additional spending on infrastructure and Eastern Economic Corridor (EEC) projects—part of the government’s 20-year “Thailand 4.0” plan to accelerate economic development. Furthermore, poverty and inequality alleviation schemes received a modest increase in funding to bolster social security and foster internal growth creation.

The announcement of the budget came against the backdrop of months of student-led protests calling for constitutional reform and seeking the resignation of Prime Minister Prayuth Chan-o-cha. In addition, the ongoing turmoil has seen two consecutive finance ministers resign in the space of a few months, with Arkhom Termpittayapaisith appointed on 5 October to become the third official since July to take over the role. The risk of weak implementation of the 2021 budget amid such political upheaval clouds the economic picture markedly.

Regarding the outlook, Charnon Boonnuch and Euben Paracuelles, economists at Nomura, commented:

“For FY21, we raise our fiscal deficit forecast to 7.1% of GDP from 6.3%, mainly reflecting the delayed implementation of the THB1trn in stimulus support measures from FY20. […] We project total spending of THB3,065bn, below the budgeted THB3,285bn, which reflects our view of the weak disbursement rate. Importantly, we expect the government to continue to shift its focus to short-term populist spending at the expense of more productive investment spending, amid falling government popularity.”

FocusEconomics Consensus Forecast panelists project a fiscal deficit of 5.5% of GDP in the 2021 calendar year and 3.5% of GDP in the 2022 calendar year.