Fiscal Policy, Debt and Budget Deficits in Thailand

Topics: Deficit, Public finance, Tax Pages: 7 (2110 words) Published: June 10, 2011
Fiscal Policy, Debt and Budget deficits in Thailand

The size of Thailand government debt
To judge the size of Thailand government debt is to compare it to the debt of other countries and to the debt that Thailand has had during the own past. Table 1 shows the amount of government debt for 34 countries express as a percentage of each country’s GDP in year 2009 and year 2010.On the top of the list are the heavily indebted countries of Japan and Italy, which have accumulated a debt that exceed annual GDP. At the bottom are Luxembourg and China, which have accumulated relatively small debts. The United States is in the middle of the pack. Thailand debt is around 30% of GDP.

TABLE 1: How Indebted Are the World’s Governments?

CountryGovernment Debt as a percentage of GDPCountryGovernment Debt as a percentage of GDP 2009 2010 2009 2010
Japan192.8198.4Spain 62.472.2
Belgium100.4102.5Denmark 51.853.7
Euro area86.391.6Slovenia44.149.9
Portugal86.392.9Czech Republic42.449.0
United States 84.492.8Slovak Republic39.847.1
Canada83.484.4New Zealand34.538.8
Ireland72.7104.9Australia 19.223.6
United Kingdom72.481.3Luxembourg18.021.0

Source : OECD Economic Outlook ,MIF and BOT

Over Thailand history ,the indebtedness of the government has varied substantially. Figure 1 shows the ratio of the government debt to GDP since 1988.

FIGURE 1: The Ratio of Government Debt to GDP Since 1988

Source : BOT
Thailand current government debt is of a small size compare to the debt of other countries or compare to the debt that Thailand has had throughout its own history. The 1997s to 2000s were unusual in that the ratio of debt to GDP increased during the Asian financial crisis with the devaluation of Thailand’s baht. From 2005, the ratio of debt to GDP declined significantly .

Thailand Government budget constraint
The fiscal budget of Thailand between year 1987 to 2010 show history of economic situation ,crisis period and decision on fiscal policy of each government. As table 2 can separate period of fiscal policy in 4 periods : (1) Fiscal policy between year 1987 to year 1996 when economics boom. (2) Between year 1997 to year 2000 when Thailand face with crisis.(3) In year 2001 to year 2006 is economic recovery period.(4) From year 2007 to year 2010 Thai economics influent by Subprime crisis.

1.Fiscal policy in year 1987-1996 : Economics booming
Between year 1981 to 1986 Thailand got the stagflation. Government run budget deficit and public debt significant raise in year 1987.In the same year economics return to growth and continuous until 1996.Government run budget surplus, which make improvement in government finance.

TABLE 2: The Government Budget Year 1987 to Year 2010

Source: Bureau of the Budget ,Thailand

2.Fiscal policy in year 1997-2000 : Tom Yum Kung Crisis
After Thailand face Asian financial crisis in year 1997,cause problem in financial economics. International reserves has been used for protect value of Thai baht and continuous of foreign capital outflow. This impact on value of Baht and liquidity inside country. In the mean time, financial institutes experience in liquidity problems and bankrupt in the end. The remain financial institutes concern about NPLs,then they reduce lending. Private sector decrease. These factors make inefficient in monetary policy. Government stimulate economics by run budget deficit. During this economic downturn severely and quickly than...
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