Thai Govt Warned Over Surge In Public Debt

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ECONOMY

Govt warned over surge in public debt

WICHIT CHAITRONG

THE NATION

BANGKOK: -- The government must address the rising level of public debt and cut populist spending to free up funding for investment in infrastructure projects, participants in a seminar said.

The Finance Ministry projects that public debt will rise to about 54 per cent of gross domestic product in the next four years, up from about 42 per cent currently. The debt-to-GDP ratio is considered safe as long as it is below 60 per cent, according to the ministry's Public Debt Management Office.

But economist-turned-politician Trairong Suwankiri yesterday warned that if the Finance Ministry's assumed GDP growth rate of about 4-5 per cent did not materialise, public debt would be much higher than projected.

"So if average GDP growth in the next four years is about 2-3 per cent, the country will face a problem of unsustainable public debt," he said at seminar hosted by the Thammasat Economics Association.

The current and past governments have run fiscal deficits in an effort to bolster the economy in the face of the global financial crisis and last year's severe floods. The government plans to run a deficit of about Bt400 billion this year and Bt300 billion next year.

High public debts can sink a country quickly, as seen in the case of the late-1990s financial crisis in Argentina, which had public debt of only 50 per cent of GDP, Trairong said.

Greece, so far, has been kept afloat only by bail-outs from the European Union, he said.

By continuing to waste a lot of money on the rice-pledging scheme this year, the government will add to the public debt, Trairong said.

Former finance minister Somkid Jatusripitak urged the government to invest more in infrastructure projects, education, and research and development to support sustainable growth.

Short-term economic stimulus will not lead to sustainable growth, he said.

Thailand could take advantage of the Asean single market if the country can improve its competitiveness through productive investment. Thailand's competitiveness now lags behind those of Singapore and Malaysia, Somkid said.

He warned that political conflict would lead to a further erosion of the country's competitiveness as the right people are not put into the right jobs because of nepotism and other forms of corruption.

"The country now lacks consciousness; people do not know what is right and what is wrong," he lamented.

Bhanupong Nidhiprabha, dean of Thammasat University's economics faculty, said fiscal stimulus was the right solution, as the global economy is slowing, but cautioned that public spending must be well targeted.

Teerana Bhongmakapat, former dean of Chulalongkorn University's economics faculty, warned the government not to be complacent over public debt. Off-budget spending means actual public debt might be as high as 50 per cent of GDP, way above the official figure of 42 per cent, he said. "Debt has been hidden in various funds, and in the future, local governments may borrow more - these are the weak spots," Teerana said.

Meanwhile, Supavud Saicheua, managing director and head of the research group at Phatra Securities, said the government's obligations to pay more social welfare, provide unlimited guarantees to depositors in state banks and subsidise farm goods could push debt higher.

"If the country can achieve economic growth of 6 per cent, it will not be a problem, but if the growth rate is only 3 per cent it will be," he warned.

He suggested the government cut spending in some areas, such as the huge rice-price subsidy.

-- The Nation 2012-06-22

[Pib]

"The country now lacks consciousness; people do not know what is right and what is wrong," he lamented.

Oh, I think they know what is right or wrong; it's just they don't know how nor have a real desire to express their dissatisfaction with how the country's financials are being handled. Then again, maybe that is a lack of consciousness.

[Kalbo]

"The country now lacks consciousness; people do not know what is right and what is wrong," he lamented.

I think he means to say 'conscience'. Either that, or he's saying everyone's asleep.

[noitom]

"The country now lacks consciousness; people do not know what is right and what is wrong," he lamented.

What a perfect characterization of Thailand!! marvelous!!

[slapout]

The national elephant could be exchanged for the three monkeys, guess what goup each represents in the land of miracles.

[ramrod711]

He warned that political conflict would lead to a further erosion of the country's competitiveness as the right people are not put into the right jobs because of nepotism and other forms of corruption.

I can't imagine that this could be happening here, surely Thaksin must be running short of relatives.

[HUAHIN62]

It's just a shame that nobody told Europe and America the same, before they indebted themselves to such an extend that it will take generations to get out of it. Begs the question if their populations knows what is right and wrong.

[pmacaodh]

Worth heeding the warnings of Europe indeed. Although, as long as it's all Baht denominated and inflation is kept high...

Still, there are too many Keynesians in charge today willing to spend money we don't have. I'd rather we spend only what we have (on infrastructure, education and basic welfare) and let the private sector take care of the rest. Call me an Austrian.

[Skywalker69]

BIG SUPRISE

Soon the THB will be very cheep.

[luckyman]

Compared with Thailand's 54 % of GDP, Europe's debt is quite less dramatic as most people want us to believe.

Did you know that Japan has a public debt of 200 % it's GDP? And they call that a very developed country too!

[steenasger]

Thailand, another Greek tragedy in waiting due to overspending, over-borrowing and corruption??

[Suradit69]

If the debt is allowed to grow as projected it would seem that Thailand is as short-sighted and as unaware of the consequences as the European Union or the US. Heaven help us if Asians are as foolish as the self-perceived masters of the universe.

[ratcatcher]

"Former finance minister Somkid Jatusripitak urged the government to invest more in infrastructure projects, education, and research and development to support sustainable growth. "

I think K.Somkid was perhaps one of the more moderate, intelligent and forward thinking men in Thaksin's clique.

He seems to have maintained a low profile since the 111 ex T.R.T. wolves were let out of captivity.

Maybe the government should heed his words.

[phiphidon]

Compared with Thailand's 54 % of GDP, Europe's debt is quite less dramatic as most people want us to believe.

Did you know that Japan has a public debt of 200 % it's GDP? And they call that a very developed country too!

14 of Europes member states have debt to GDP ratio's of over 60%, Greece obviously being the highest around 163% at the end of 2011, followed by Italy at 120% and Ireland at 108% - Seems pretty dramatic to me.

http://europa.eu/rapid/pressReleasesAction.do?reference=STAT/12/62&

Thailand has a long way to go to reach that heady state and I'mpretty sure there are safeguards in place to stop any thai government get the percentage above a certain level.

If Abhisit and Korn had lasted they were planning to have a ratio of nearly 60% in 2012 as a result of their financial inducement plan, "Investing from strength to strength" and that was without having to pay for the aftermath of the most rainfall in 50 years.........

Prime Minister Abhisit said that Thailand’s public debt in 2012 was likely to increase to 58-59 percent of GDP and it would drop below 50 percent in 2016

http://thailand.prd.go.th/print.php?id=4404&type=inside

[cloudhopper]

BIG SUPRISE

Soon the THB will be very cheep.

Compared to what? All the world currencies are being debased "like mad".

[Mitker]

Compared with Thailand's 54 % of GDP, Europe's debt is quite less dramatic as most people want us to believe.

Did you know that Japan has a public debt of 200 % it's GDP? And they call that a very developed country too!

Mostly subscribed by Japanese entities => No external pressure like Greece or Spain would face.

[Mitker]

Thailand has a long way to go to reach that heady state and I'mpretty sure there are safeguards in place to stop any thai government get the percentage above a certain level.

Safeguard just like IMEX Bank had until a certain T in charge instructed them to rise its ceiling so that it could finance (with public money) the private deal of Wonder T. with the Burmese generals. Pretty sure indeed.