The latest figures on government tax collections for July 2006 indicate that the government's tax collections are still falling short of targets in continuation from preceding months. In July, tax revenues from three major organizations -- the Revenue, Excise and Customs departments -- showed an aggregate value of THB96.9 billion, which is THB6.7 billion -- some 6.5 percent – lower than target. Not only has the excise taxes collected come out lower than target (particularly those on gasoline), but also individual and corporate income taxes for July, as well.
Apart from those below-the-line tax revenues, the government's fiscal status may be affected by many factors and incidents, i.e., the possibility that the fiscal burdens of the Ministry of Finance may rise due to its approach toward solving the debt problems of some state enterprises, as well as higher interest burdens from its borrowing to buy the recapitalization shares of a financial institution. It is also possible that next year, the new Cabinet may institute new fiscal measures to stimulate the economy, i.e., higher deductions on individual income tax and the probability of deliberations on cutting the expense budget for fiscal year 2007, due to expectations that economic growth next year may be lower than the forecast of the authority.
KResearch forecasts that the economic downtrend and the necessity for the government to address these issues will result in more fiscal constraint by the government. Specifically, the government will likely face a deficit in the cash balance for FY2006 and 2007. Nevertheless, the government's fiscal position will remain within a sustainable framework. In other words, the ratio of public debt to GDP will not exceed 50 percent, and the ratio of public debt to the national budget will not be over 15 percent. Given the latest outstanding debt at 41.7 percent of the GDP as of the end of May 2006, the government should be able to add debt by another THB 600 billion and THB 300 billion in 2006 and 2007, respectively. However, the public debt is not likely to reach those ceilings. So, overall, the cash deficit of the Thai government will not likely have much impact on the national economy or stability of financial markets, unless there is an extreme disturbance, such as with oil prices, or a global economic downturn following one in the US economy that would worsen the economic environment and lead to a deeper and longer stagnancy than what has been expected. Eventually, to act with caution and adhere to fiscal discipline will remain an appropriate policy for the time being.
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