Economists are throwing support behind the idea of raising the public debt ceiling to more than 70% of GDP to drive economic growth.
Amonthep Chawla, chief economist at CIMB Thai Bank (CIMBT), said a 5 to 10-percentage-point increase in the rate of public debt, now standing at 70% of GDP, is unlikely to cause any problems, pointing out that the additional debt should contribute to higher growth over the longer term.
Arthid Nanthawithaya, chief executive of SCB X, late on Friday recommended the government lift the public debt ceiling to allow fiscal policies to play a greater role in driving the economy.
A large budget is required to support the government's stimulus and relief packages to bolster the economy and support lower-income earners to survive the ongoing vulnerabilities.
"It is rational to raise the public debt ceiling temporarily as the country is facing uneven economic growth with the lower-income segment facing particularly fragile conditions," he noted.
According to an SCB Economic Intelligence Center survey, around 65% of respondents have sufficient income to cover their expenses. Some 80% of respondents, whose income is less than 30,000 baht per month, face such a situation.
Mr Amonthep said the higher public debt ceiling should align with higher economic potential and competitiveness of the country in order to upgrade and sustain economic growth for the longer term "rather than cash handouts".
During the pandemic, Thailand and many other countries experienced levels of public debt to support their citizens and the economy. Thai GDP growth has been lagging other regional peers post-pandemic.
"The new government debt creation should be used for projects which strengthen economic fundamentals and improve people's wellbeing. New debt should be the new income generator to sustain economic expansion in the long run," he said.
Mr Amonthep said raising the public debt ceiling could possibly affect the country's sovereign credit rating and the government's financial costs. Thus, improving the government's balance sheet is another critical factor to take into account.
According to Suchada Pantu, first senior executive vice-president for Tris Rating's credit rating group, said normally the public debt to GDP ratio is an element for international credit rating agencies in deciding the sovereign credit rating of each country.
When a country decides to raise the public debt ceiling, it should be on the grounds of a reasonable approach with clear objectives set for the new borrowings.
"If the new debt can generate higher income and contribute to economic growth, that could provide a positive outlook for the sovereign rating. If the country fails to do so, it could turn out to present a negative outlook," she said.