Bangkok: Deputy Finance Minister Woraphat Thanayawong has raised concerns about Thailand's fiscal position, emphasizing the government's pressing need to address economic challenges head-on. He highlighted the significant risk factors that could impact the country's financial stability if not addressed promptly.
According to Thai News Agency, Woraphat paid respects to the Ministry's sacred objects and was welcomed by ministry executives as he prepared to advance several economic policies. He revealed on social media that Thailand's overall fiscal risk assessment currently stands at 7.6 out of 10, a substantial increase from the pre-COVID level of 4.3, indicating limited financial flexibility for the new government.
One of the primary concerns is public debt, which is nearing its ceiling, with projections indicating it could reach 65% of GDP by 2025. The interest burden might surpass 10% of government revenue, and with the International Monetary Fund estimating a "final buffer" between 77-87%, any economic slowdown or rise in global interest rates could cause the debt ratio to exceed this limit, undermining financial market confidence.
The government's revenue collection structure is also weak, with a revenue-to-GDP ratio significantly below global standards by approximately 3%. This shortfall is attributed to the large informal sector, absence of a Capital Gains Tax, low property and inheritance taxes, and a minimal VAT rate of 7% compared to neighboring countries' 12-15%. Without substantial tax reform, the revenue-to-GDP ratio will remain stagnant, potentially worsening debt stability.
Government expenditures are expanding, particularly in personnel, pensions, and healthcare costs for civil servants, posing sustainability risks to the retirement fund. Additionally, the socio-economic challenges, such as an aging society, shrinking tax revenue, increasing pension and health expenditures, and high household debt, are exacerbating fiscal pressures.
Geopolitical factors, particularly fluctuating oil prices, further strain the treasury. Thailand's rank as the 9th highest globally on the risk index necessitates additional budget allocations for relief and recovery, with any external shocks, like a sharp rise in oil prices or severe disasters, having an immediate budgetary impact.
Woraphat underscored the need for "integrated" fiscal rebalancing, advocating for expenditure limitations, retirement fund reforms, and tax system overhauls, including personal and capital taxes, VAT expansion, and the introduction of carbon taxes. He also emphasized the importance of returning to a deficit framework of 3% of GDP upon economic recovery.
In conclusion, Thailand's new government confronts a baseline of entrenched fiscal pressures across debt, revenue, expenditure, and socio-economic dimensions. Without decisive reforms, the country faces escalating risks and potential economic instability. The government's primary challenge is not merely policy selection but confronting the existing fiscal realities to prevent long-term economic decline.