biggest deficit since 2001, if Thaksin loses the economy the people in the north will turn on him. If there isn't money for handouts then people will soon get tired of him.

First budget deficit in 4 years may be posted

Bloomberg

THE COUNTRY may post its first budget deficit in four years in 2006 after the government received less- than-expected revenue from taxes as the economy slows, a government spokesman said.

Revenue will probably total 1.34 trillion baht ($35.7 billion) for the year ending September 30, about 24 billion baht less than projected in the budget bill, government spokesman Surapong Suebwonglee told a press briefing in Bangkok. The government had planned to balance the budget this year by spending 1.36 trillion baht of estimated revenue.

Southeast Asia's second-biggest economy, which has been governed by a caretaker administration since February, may expand at the slowest pace since 2001 as high fuel costs and a political stalemate hurt consumption and investment, according to the central bank. Thailand is scheduled to hold a new election on October 15, its third in less than two years, after a court annulled the April 2 poll.

The country had budget surpluses every year from 2003 to 2005 as economic growth boosted profits and tax revenue. The finance ministry's tax receipts and profit contribution from state-owned companies in July totaled 78.5 billion baht, 9.6 percent lower than the target, the finance ministry said on August 8

not broke, spending more than it earns....for now.

Lots of arguments for and against deficit spending.

Not defending the government of course, as they are pretty lousy economic managers.

Does this have any effect on the exchange rate?

By these criteria the US of A is totally bankrupt.

Governmentts all over the world run on borrowed money.

It's called the National Debt.

President Bush can only dream that he would be as deep in debt as Thailand.

Does this have any effect on the exchange rate?

The debt per se is unlikely to impact the exchange rate a great deal, but what will cause it to move (in the favour of other countries' currencies) is the general slowing of the economy, lower confidence in the government and lower investor confidence.

Already over the last few months we have seen the exchange rate for AUD (the only one I watch) move from less than 27 to almost 29 baht/dollar.

This is great for anyone who gets paid in foreign currency, not so good of people with fistfuls of THB trying to go overseas!

By these criteria the US of A is totally bankrupt.

Governmentts all over the world run on borrowed money.

It's called the National Debt.

Exactly. As it relates to Thailand, with the development of the capital markets over the past several years, deficits can be easily financed through the THB bond markets. While deficits are not good over the long term, especially when rates rise, governments do this all the time.

If the economy is slowing, why does the baht keep getting stronger?

Revenue will probably total 1.34 trillion baht ($35.7 billion) for the year ending September 30

Well, Toxin is still sitting on about $0.6 Billion due tax payments ?. Thats a significant contribution.

If the economy is slowing, why does the baht keep getting stronger?

I can only comment on the dollar.

The more important Asian currencies have strengthened against the dollar, and Thailand is following those Asian currencies.

That said, if Thailand starts looking alot more like the Philippines than Singapore, those poor fundamentals could cause a weakening. I am thinking more about a worsening political crisis.

Deficit and debt are not the same things. Deficit is, as samran says, the govt spending more than it is making--it applies to one budget year. Debt, on the other hand, is the accumulated debt from all the deficit spending.

By these criteria the US of A is totally bankrupt.

Governmentts all over the world run on borrowed money.

It's called the National Debt.

Indeed, but you can not compare US (who has the privilege to print the world reserve currency : US Dollar) and a country like Thailand. Two really different scale...

Furthermore, some economists think that a budget deficit is good when a country faces an economic downturn, like a recession (to pump cash into the engine).

The problem is : Thailand is not in recession. The official figure of growth are still good (even, if it's going down, last forecast would be +3.5 to +4 %.)

Last point : it would be necessary to assess the over spending of the thai government.The deficit is due to investment, or is it to pay common expenses ?

The US and Thailand are different cases. Both economys may be heading for a fall, but the US won't be allowed to crash too badly, as the international effects would be to severe. An economic crash in Thailand, however, would only have regional consequences.

This may be the start of an economic downturn that could last 2 to 4 years.

on the contrary, i think the Thai economy will perform better next year compared to this year.

I was being sensationlist, the Thai government is clearly not broke, but it makes a better title!

However if they have to borrow huge sums to carry on the level of grassroots spending it may not leave the country in a healthy position once he is finally forced from power.

I think a deficit was to be expected due the the world economic effect on Thailand.

They will need to find money from somewhere though to finance futher projects.

If the economy is slowing, why does the baht keep getting stronger?

Other currencies might be becoming relatively weaker to the baht. Plus, they have raised interest rates here...makes the baht more attactive to investors who invest in such things.