Thailand’s 2023 budget monitors spending and debt – The Diplomat

For many countries in Southeast Asia, September is the budget season. It is time for national legislatures and executive branches to begin deliberating the horse and detailing their tax and spending plans for the coming year. More recently, the pandemic has complicated this process because accurate economic forecasting was essentially impossible and governments had to run large deficits and take on debt while their economies were closed.

A lot of guesswork and uncertainty goes into any budget, but the past two years have been particularly difficult. With the worst of the pandemic expected behind us, this year’s job for financial planners should be a little easier, and Thailand’s proposed 2023 budget in many ways indicates a hopeful return to normalcy.

The main thing to know about the budget in Thailand is that the government does not like to be in deficit or bear debt. Thailand is first and foremost an export-oriented economy: it is a regional leader in the export of manufactured goods such as cars, as well as services such as tourism. Export-oriented economies need stable currencies, and one way to keep your currency from high volatility is to manage a tight financial shipment. Do not spend a lot, do not borrow a lot, accumulate large foreign exchange reserves and do not run a current account deficit.

There is not much Thailand can do in the short term on the current account, given that energy imports such as coal and oil have been very expensive lately. But it appears that oil prices have peaked, and a strong recovery in the tourism industry next year will help push the current account back into surplus. Meanwhile, the government is looking to keep increases in spending and borrowing at modest levels.

The budget for 2023 is expected to reach the hour 3.18 trillion baht (about $88 billion at current exchange rates). This represents an increase of 3 percent from the current year, and a decrease of 3 percent from 2021 when budget allocations reached their highest level. As mentioned above, Thailand has been keen to reduce these spending levels. In 2022 the projected budget Sharp cuts Based on somewhat wishful thinking about economic growth. In 2023, the economy is more realistically expected to grow by about 4 percent, and this should provide a jump in revenue to offset moderate increases in spending.

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This is important because the government also wants to get it Public debt under control. From 2019 to 2020, direct government borrowing increased by 29 percent. In 2021, it rose another 24 percent. By June of this year, total debt had doubled from 2017. This was clearly the result of the pandemic when nearly every government in the world had to borrow to fund shortages when the pandemic shut down their economies.

With things back to normal, the government wants to slow down the rate of accumulation of liabilities in its balance sheet. The fiscal deficit is expected in 2023 About 695 billion baht or $20 billion, which is still slightly above pre-pandemic levels but significantly lower than 2020 and 2021. We should expect to see this trend continue into subsequent budgets, as financial planners almost certainly will seek to keep a tight lid on all of spending and debt for the foreseeable future.

I think Thailand’s approach to budgeting contrasts usefully with that of its neighbor, Indonesia. Indonesian financial planners also suggest a modest drop in spending in 2023, but overall expenditures will still be 32 percent higher than the previous pandemic baseline in 2019. By comparison, Thailand’s spending for 2023 will be only 6 percent higher than it was in 2019. So it does not appear that The pandemic will reshape Thailand’s political economy or fiscal policies in a major or permanent way.

This reflects different policy objectives. The most important thing in Thailand is to keep the baht stable and maximize exports, and to do that they need to keep a close eye on spending and debt; Otherwise, the capital markets will punish them. On the other hand, Indonesia showed much less Respecting the capital marketsThe pandemic and its aftermath was used to drive a number of major structural shifts including reforming fuel subsidies, raising taxes and increasing public spending.

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