Thailand to widen 2025 budget deficit as it reworks handout plan
THAILAND plans to raise the fiscal deficit estimate for next fiscal year to stimulate a sluggish economy, according to a senior official, the clearest signal yet that the government is veering towards funding a US$14 billion cash handout programme through the state budget.
The government needs to update the budget framework to bring it in line with the changing economic situation, Pornchai Thiraveja, director-general of the Fiscal Policy Office, said after a meeting of the fiscal and monetary policy committee chaired by Prime Minister Srettha Thavisin in Bangkok on Monday (Apr 1).
The meeting agreed to review the country’s medium-term budget framework that will allow for a wider deficit for the fiscal year starting Oct 1.
Srettha’s Cabinet last year approved a budget gap of 713 billion baht (S$26.4 billion), or 3.56 per cent of the country’s gross domestic product, for fiscal year 2025 under the medium-term fiscal framework.
The outline calls for a gradual reduction of the shortfall until 2028 with a target to achieve fiscal balance “at an appropriate timing.”
Pornchai’s comments came as Thailand is weighing the option to fund its 500 billion baht “digital wallet” plan from the state budget.
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The original proposal to finance it through a one-time borrowing faced resistance from some state agencies and lawmakers.
Srettha last week ordered officials to come up with a funding plan that may also involve a combination of borrowing and the state budget.
The stimulus plan, delayed by several months over differences on how it will be funded, is set to be implemented in the fourth quarter of calendar year 2024. Some central bankers and opposition parties have argued that the payout may fan inflation and widen fiscal deficit.
Pornchai didn’t specify if the larger deficit was to make room for the cash handout scheme, aimed at reviving a sluggish economy through private consumption. Pornchai also declined to give details on the planned increase, saying it will first need to be approved by the Cabinet.
Deputy Finance Minister Julapun Amornvivat said earlier that details of the digital wallet financing will be announced on Apr 10. There is already a conclusion, and the plan will face no objection as it has cleared nearly all concerns, he added.
Stimulus measures, including the digital wallet plan, are billed as “extremely necessary” by Srettha, who doubles as Finance Minister. The Thai economy is coming off a decade of average sub-2 per cent growth and still faces other headwinds, including uneven economic recovery after the pandemic and high interest rates.
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