Oil shock pushes Thailand to rework spending to contain deficit

[BANGKOK] Thailand is reshuffling state spending to cushion the impact of an oil shock while keeping its deficit target intact, highlighting the strain the Middle East conflict is placing on public finances.

Prime Minister Anutin Charnvirakul’s government will maintain deficit target for fiscal 2027, starting Oct 1, at 788 billion baht (S$31.2 billion), according to a statement on Wednesday (Apr 22). That compares with an estimated 860 billion baht deficit in the current year.

To hold the line on the deficit, the government plans to rely on spending cuts and reallocations of its 3.79 trillion baht outlay, even as it retains roughly 800 billion baht of borrowing capacity under its 70 per cent public debt ceiling.

Officials aim to free up 95 billion to 125 billion baht by reclaiming unused funds from government agencies and trimming non-essential spending in the current fiscal year, according to Finance Minister Ekniti Nitithanprapas. A Budget transfer Bill is expected to be submitted to parliament by mid-June.

The measures reflect mounting fiscal pressure from higher energy costs and weaker economic activity, a dynamic seen across many economies as the Middle East conflict pushes up oil prices. In Thailand, the strain is already prompting the newly formed government to consider raising its public debt ceiling.

Ekniti said agencies have been instructed to cut non-essential spending in the 2027 Budget, including overseas travel, non-urgent construction projects and provincial development programmes.

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He said the government will redirect funds towards higher-impact uses, prioritising projects that reduce long-term fiscal burdens.

As an example, Ekniti pointed to shifting construction Budgets towards installing solar panels on government buildings to lower recurring electricity costs and strengthen fiscal resilience.

Moody’s Ratings on Tuesday upgraded Thailand’s outlook to stable, about a year after lowering it to negative. Fitch Ratings has maintained a negative outlook, while S&P Global Ratings keeps its view at stable. BLOOMBERG