A 2007 budget deficit would boost growth: Thanong
Caretaker Finance Minister Thanong Bidaya said yesterday the government may have to run a budget deficit in 2007 in a bid to boost economic growth, while the central bank endorsed the idea, saying it is "good timing" for a fiscal deficit.
The Finance Ministry will present a five-year fiscal plan to the Cabinet next week, including a proposal to extend the treasury-bill limit to beyond Bt250 billion. Thanong said the government would like to see gross domestic product (GDP) grow by about 4.5 per cent next year, saying economic growth of 3-4 per cent would be too low. The government still officially plans a balanced budget for the 2007 fiscal year, starting October 1, with spending at Bt1.476 trillion. Thailand is also expected to have a balanced budget for fiscal year 2006, with spending at Bt1.36 trillion. However, the 2007 budget has been delayed due to political uncertainty pending the general election on October 15. Thanong said the ministry's target was to reduce public debt to a figure not exceeding 40 per cent of GDP next year, with the debt-service ratio not more than 15 per cent and declining to below 10 per cent within five years. As of the end of June, public debt totalled Bt3.26 trillion or 42.06 per cent of GDP. "From the public-debt target proposed by the committee, our level is quite low and tends to be lower than the world standard," said Thanong after chairing a public debt management committee meeting. Bank of Thailand (BOT) governor MR Pridiyathorn Devakula said he agreed with Thanong's idea of a budget deficit for 2007. He said it would boost economic growth next year because economic stability was currently in good shape. Public debt is expected to climb down to below 40 per cent of gross domestic product (GDP), he said. "It is a very good timing to implement the budget deficit, which will help drive the economy. It will be good if the economy could grow more than 4 per cent, as the Bank of Thailand forecast growth of 4-5.25 per cent next year," he said. However, the governor warned that the size of the deficit should be at an "appropriate" level so as to avoid any instability. A slight deficit would also be suitable to allow the BOT to implement monetary policy properly. "If the size of the deficit is not too much, monetary policy can move [be implemented] normally," he said.
Anoma Srisukkasem The Nation
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