Amid mounting concerns the economy will expand by less than 2% this year, the Finance Ministry's think tank has set a higher budget disbursement target for the first quarter of next fiscal year in a bid to rev up the pace of growth and offset anticipated delays in export recovery.
The budget disbursement target for the October-December quarter will be raised to 30% of the total budget from the regular 25% to give a boost to the economy during the final quarter of this year, said Ekniti Nitithanprapas, deputy director-general of the Fiscal Policy Office (FPO).
"Every 100 billion baht pumped into the economy will raise growth by 0.7 to 0.8 percentage points," he said.
The budget for fiscal 2015 starting Oct 1 has set public spending at 2.575 trillion baht, up by 2% from this year's budget.
Of the total, 2.027 trillion baht or 78.7% is set for expenditure, 450 billion or 17.5% for investment and the rest for Treasury reserves and debt repayments.
The budget bill is pending National Legislative Assembly deliberation.
Even though consumer and private investor sentiments have improved substantially since the military took power on May 22, GDP growth and a string of economic indicators remain tepid, as high household debt has hobbled the junta from launching a consumption stimulus, while exports — accounting for 70% of GDP — are still faltering.
Public spending appears to be the only engine driving economic growth.
July exports unexpectedly fell by 0.85% year-on-year to US$18.9 billion versus June's 3.9% rise.
In the first seven months of 2014, exports declined by 0.42% from a year earlier.
The economy in the second quarter expanded by 0.4% year-on-year and 0.9% quarter-on-quarter, compelling the National Economic and Social Development Board to trim this year's growth forecast to between 1.5% and 2% from a range of 1.5% to 2.5% in May.
Mr Ekniti said the Finance Ministry would push government agencies to accelerate drawing down budget in the remaining two months of this fiscal year to stimulate the economy after 75% of the 2.525-trillion-baht budget had been disbursed during the first 10 months of fiscal 2014.
Government expenditure gained traction after the military's power seizure as seen by the fact that budget drawdown surged 17% last month alone compared with an average 2% increase over the first nine months of this fiscal year.
The FPO recently cut its growth forecast to 2% this year from 2.6% projected in March, with the current estimate based on export growth of 1.5%.
Export value must reach $20 billion a month for the rest of this year to bring its full-year growth to 1.5%, Mr Ekniti added.
Bank of Thailand spokesman Chirathep Senivongs Na Ayudhya said the central bank's official economic growth forecast remained at 1.5% this year, but further assessment would be made next month.
Since growth contracted by 0.1% in the first half, growth must be sustained at 4% in the second half in order to achieve the 2% full-year target, he said. The economy is expected to grow by 4-5% in the next four quarters, in accordance with its potential.
The central bank hopes public expenditure will stimulate private investment, both of which are considered as drivers of economic growth.
Mr Chirathep said the central bank agreed with fiscal policy reform, but a tax hike should be done in times of growth.