Academics yesterday urged the government, with its populist policies, to curb public debt that could go beyond gross domestic product, while suggesting logistics development, improvement of labour productivity and more private-sector participation in stat
“Although Thailand has yet to face the fiscal cliff, it could reach that critical point if all state administrative levels fall into the trap of populism, when competition is rising,” Veerathai Santiprabhob, adviser to the Thailand Development Research Institute, told a ThaiPublica seminar on “Brainstorm on Fiscal Cliff, Thai Government Debts”.
The populist policies extend from the first-car and debt moratorium to rice pledging schemes and are a part of the regular budget, which will likely erode the nation’s investment budget.
The government has to issue special laws to borrow funds for investment and that could raise public debt.
Pisit Puapan, director of macroeconomic analysis at the Fiscal Policy Office, said outstanding public debt as of March amounted to Bt5.12 trillion or 44.2 per cent of GDP. About 97 per cent was long-term, baht-denominated borrowings.
Public debt to GDP is expected to set a record high of 50 per cent of GDP in 2016 and decline to 45.7 per cent in 2020.
The public debt level remained manageable, but the government should prevent public debt from going beyond GDP and practice fiscal discipline, said Pipat Luengnaruemitchai, assistant managing director of Phatra Securities.
Call for closer look
A closer look was needed into the components of public debt and the greater use of off-budget financing such as money from state-run banks for populist policies like the rice mortgaging scheme. Other concerns range from state enterprise investment and debts of local administrative organisations with more borrowing capacity to off-budget sources like the Oil Fund.
It was difficult to discontinue populist policies, he said, adding that the issue was how to survive with populism while increasing the country’s competitiveness.
The government should allow the private sector to take part in state services and enhance transparency in laws for policy implementation in order to increase competitiveness.
The government’s announcement that it would not launch stimulus measures in the rest of this year was laudable, but it needed to do more on economic reform for the sharpening of the country’s competitive edge, logistics investment and improvement of labour productivity.
Thailand was turning into an ageing society, which could boost state expenditures for elderly care and household expenses, and sap the nation’s savings, while more focus was being put on economic stimulus, not economic policy.
Amid the global uncertainty that has affected Thailand, the government has to take risk management seriously, he added.