The House of Representatives resolved to pass a THB2.4 trillion FY2013 Budget Bill on May 23, 2012 in the first reading, and set up an ad-hoc committee to further scrutinize the bill. Aside from the planned spending set out in it, the government has an additional investment plan, vis-à-vis the emergency decree, ‘Empowering the Ministry of Finance to Borrow for Construction of Systems for Managing Water, and Building the Country's Future', B.E. 2555 (2012 A.D.), in the amount of THB350 billion. Moreover, the government has a long-term plan to invest in a number of infrastructure development programs during 2012-2016, preliminarily estimated at THB2.27 trillion, per their ‘Reconstruction and Building (of the) Country's Future' strategy.
If everything goes as planned, the government will have an expenditure budget of over THB2.8 trillion for FY2013. KResearch is of the view that government spending will continue to be an important mechanism driving the Thai economy in 2012 through to 2013.
However, the government's borrowing from domestic sources, along with private sector needs to mobilize capital, may squeeze liquidity within the Thai financial system. To ease this, the government may need to prioritize their spending plans so that state investments will not be concurrently over-concentrated in a certain time period. Meanwhile, the overall liquidity management via effective tools by the Bank of Thailand could help ensure sufficient liquidity exists in the financial system.
Moreover, government borrowing to cover the budgetary deficit and emergency decrees may cause public debt to exceed 50 percent of the GDP in FY2013. Although that level is low relative to some other nations, and within our 60-percent-of-GDP fiscal framework, it may have implications toward medium-to-long term fiscal stability.
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