The government plans to increase spending on investment to its highest level in seven years in an attempt to spur local demand and offset weakening exports.
The fiscal year 2016 budget accepted by the National Legislative Assembly today will include a deficit of 390 billion baht, which is 56% higher than this year. Investment will account for a fifth of total spending, Prime Minister Prayut Chan-o-cha said Thursday in parliament.
Gen Prayut is accelerating spending to bolster the economy amid falling exports and sluggish domestic demand. Gross domestic product barely grew last quarter from the previous three months, and the statistics agency lowered its forecasts for GDP expansion and exports even after the central bank cut the interest rate for a second straight meeting last month.
"Higher investment spending is mainly for construction works like roads and rails, which will definitely help boost the economy," Arkhom Termpittayapaisith, secretary-general of the National Economic and Social Development Board, said after the release of GDP data on May 18. "We decided to set such a high budget deficit so we can increase investment, which is much needed for Thailand."
According to the draft of the budget, which was presented at the NLA today for discussion, total spending will rise 5.6% from a year earlier to 2.72 trillion baht, with revenue of 2.33 trillion baht. The budget assumes real GDP growth of 3.7% to 4.7% with inflation at 1.1% to 2.1% next year.
Investment boost
Investment made up about a fifth of total spending in fiscal years 2002 through 2009. It dropped to 12.6% in 2010 during the global financial crisis, and hasn't gone back to the 20% level since, according to the Office of the Budget Bureau.
The government will allocate 543.6 billion baht for investment in 2016, or about 20% of the total, Gen Prayut said. Of that, about 297 billion baht will be used for investments in rural areas or cities and towns outside Bangkok.
"We will not create more debt than is necessary," Gen Prayut said Thursday in a speech to parliament. "We will spend based on urgency."