BoT chief frets over 'fiscal immunity'
Public sector must shrink, Veerathai says
Bank of Thailand governor Veerathai Santiprabhob has urged the government to downsize the public sector and improve spending efficiency to avert a prolonged fiscal budget deficit from snowballing in the future.
"Our fiscal immunity may be far lower than many people think," he told Tuesday's seminar held by the Thai Journalists Association. "Prioritising state spending efficiency and downsizing the public sector is crucial. Otherwise the fiscal immunity that we hope to help strengthen and sustain the economy will instead become a problem in the future."
Mr Veerathai said the government will shoulder a rising burden from paying welfare to the elderly as Thailand becomes an aged society, while the regular budget has swollen as state agencies take on larger roles. The social safety net, big-ticket infrastructure projects and pork-barrel policies for short-term political gain are testing fiscal fundamentals, he said.
The medium-term fiscal forecast has the budget deficit continuing for 12 years before reaching a balance.
"The issue is worrisome because the economy is already growing in line with its potential, but balancing our fiscal position takes a long time," Mr Veerathai said.
Although the country's macro– economic picture is quite robust, household debt is considered to be in a fragile state.
Thailand's ratio of household debt to GDP, which stood at 77.8% at the end of the third quarter of last year, is viewed as high when compared with other countries with similar economies.
Moreover, bad debt is still high and most people have not reduced their debt even as they approach retirement, Mr Veerathai said.
"Thai households must face the rising debt problem as Thailand continues to age as a society," he said.
If people cannot rely on their savings when they retire, they eventually will become the state's burden and further erode fiscal immunity, the governor said.
Suphachai Chearavanont, chief executive of conglomerate Charoen Pokphand Group, said at the same event that he was optimistic about the ongoing trade row between the US and China, predicting it to end in the next few years.
He said that while the two giants seem like arch rivals, the pair are trade partners by nature because China is the world's de facto manufacturing base.
Mr Suphachai said Thailand is in line for more opportunity than risk from the trade row because the country is the centre of Asean.