BT1.2-TRILLION BUDGET: Fiscal policy tightening
Published on Jun 22, 2004
'05 to see 1st balanced budget since crisis
The Thaksin government will tomorrow present a Bt1.2-trillion fiscal budget for a two-day parliamentary debate, marking Thailand's first balanced budget since the 1997 economic crisis.
The budget for the 2005 fiscal year from October 1, 2004 to September 30, 2005 represents a tightening of Thailand's fiscal policy, amounting to spending of 17 per cent of gross domestic product.
"The Bt1.2-trillion budget is a modest 3.4-per-cent increase over the fiscal 2004 budget of Bt1.16 trillion. Since inflation is expected to be 2.5 to 3.0 per cent, the increase will therefore be negligible in real terms," Phatra Securities Co said in its June 18 report.
Of particular interest is the investment portion of the 2005 budget. The government will allocate Bt302 billion for investment projects, most of which are old projects. None of the investment budget will go towards financing the Bt1.5-trillion worth of infrastructure projects to modernise Thailand over the next five years, as announced by Prime Minister Thaksin Shinawatra.
Earlier, Finance Minister Somkid Jatusripitak said that due to strong revenue collection, the government would be able to present a balanced budget for the first time since the 1997 crisis.
"So far we have collected tax revenue that exceeds the original forecast by Bt120 billion. With public debt falling to 44-45 per cent of the gross domestic product and international reserves of US$42 billion [Bt1.7 trillion], we're in a strong position to move ahead," he said at a seminar in Cha-am a week ago.
By moving to tighten its fiscal policy, the Thaksin government hopes to rely more on investment rather than government spending as a key engine of economic growth over the next five years.
The head of the International Monetary Fund's Asia-Pacific Department, Alessandro Zanello, said last week that it would be unwise for the Thai government to rely on extra spending from the budget to spur economic growth, which should be allowed to run its course.
The Education Ministry will get the largest budget allocation at Bt203 billion, followed by the Central Budget at Bt200 billion, the Finance Ministry at Bt140 billion and the Interior Ministry at Bt139 billion.
The Central Budget, in principle, will be earmarked for an emergency-spending programme. However, in practice, the prime minister has full authority over Central Budget spending, which may be used to supplement the populist programmes in the investment budget.
As Thai industries are operating at 75-per-cent capacity across the board, they will be looking forward to initiating new investments to expand their production. This feature will create a private-investment drive, while the government will unlikely be able to help finance new investments from its budget.
Phatra Securities stressed that Thailand had enough domestic savings to finance the Bt1.5 trillion to Bt2 trillion needed for infrastructure investments, which include new roads and rail lines, over the next five to six years.
"Domestic financing should not pose a problem given that savings at 30 per cent of GDP is well above investment, which is currently 23 per cent of GDP," it said. "The 7-percentage-point difference translates to over Bt400 billion per year in terms of excess savings.
"Stated simply, excess domestic savings alone will be sufficient to finance investment worth Bt2 trillion over the next five years. That is why the government is confident that with the right financing incentives in place, it will be able to mobilise the domestic financial resources it needs to bring the infrastructure projects to reality."
Thanong Khanthong
THE NATION
Published on Jun 22, 2004
'05 to see 1st balanced budget since crisis
The Thaksin government will tomorrow present a Bt1.2-trillion fiscal budget for a two-day parliamentary debate, marking Thailand's first balanced budget since the 1997 economic crisis.
The budget for the 2005 fiscal year from October 1, 2004 to September 30, 2005 represents a tightening of Thailand's fiscal policy, amounting to spending of 17 per cent of gross domestic product.
"The Bt1.2-trillion budget is a modest 3.4-per-cent increase over the fiscal 2004 budget of Bt1.16 trillion. Since inflation is expected to be 2.5 to 3.0 per cent, the increase will therefore be negligible in real terms," Phatra Securities Co said in its June 18 report.
Of particular interest is the investment portion of the 2005 budget. The government will allocate Bt302 billion for investment projects, most of which are old projects. None of the investment budget will go towards financing the Bt1.5-trillion worth of infrastructure projects to modernise Thailand over the next five years, as announced by Prime Minister Thaksin Shinawatra.
Earlier, Finance Minister Somkid Jatusripitak said that due to strong revenue collection, the government would be able to present a balanced budget for the first time since the 1997 crisis.
"So far we have collected tax revenue that exceeds the original forecast by Bt120 billion. With public debt falling to 44-45 per cent of the gross domestic product and international reserves of US$42 billion [Bt1.7 trillion], we're in a strong position to move ahead," he said at a seminar in Cha-am a week ago.
By moving to tighten its fiscal policy, the Thaksin government hopes to rely more on investment rather than government spending as a key engine of economic growth over the next five years.
The head of the International Monetary Fund's Asia-Pacific Department, Alessandro Zanello, said last week that it would be unwise for the Thai government to rely on extra spending from the budget to spur economic growth, which should be allowed to run its course.
The Education Ministry will get the largest budget allocation at Bt203 billion, followed by the Central Budget at Bt200 billion, the Finance Ministry at Bt140 billion and the Interior Ministry at Bt139 billion.
The Central Budget, in principle, will be earmarked for an emergency-spending programme. However, in practice, the prime minister has full authority over Central Budget spending, which may be used to supplement the populist programmes in the investment budget.
As Thai industries are operating at 75-per-cent capacity across the board, they will be looking forward to initiating new investments to expand their production. This feature will create a private-investment drive, while the government will unlikely be able to help finance new investments from its budget.
Phatra Securities stressed that Thailand had enough domestic savings to finance the Bt1.5 trillion to Bt2 trillion needed for infrastructure investments, which include new roads and rail lines, over the next five to six years.
"Domestic financing should not pose a problem given that savings at 30 per cent of GDP is well above investment, which is currently 23 per cent of GDP," it said. "The 7-percentage-point difference translates to over Bt400 billion per year in terms of excess savings.
"Stated simply, excess domestic savings alone will be sufficient to finance investment worth Bt2 trillion over the next five years. That is why the government is confident that with the right financing incentives in place, it will be able to mobilise the domestic financial resources it needs to bring the infrastructure projects to reality."
Thanong Khanthong
THE NATION
posted by Bob Boonhod @ 6:21 AM
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