Thailand sets budget deficit at 5 of GDP in FY 1999.
The Thai government decided Tuesday to increase its budget deficit in fiscal 1999 to 5% of gross domestic product (GDP) to stimulate the domestic economy and boost social development programs. The Thai cabinet approved its sixth letter of intent to the International Monetary Fund (IMF) outlining the government's plans to achieve economic recovery. Fiscal 1999 started in October this year. On approval of the letter by the IMF board of directors, Thailand will be eligible to receive a 480 million dollar disbursement, the sixth quarterly installment in a 17.2 billion dollar IMF-led bailout package agreed to in August last year. Thailand has already received 11.95 billion dollars of the package. The letter stated that the Thai economy is likely to reach 1% growth next year. ''This implies a fairly vigorous rebound,'' it said. The Thai economy will reach 3 to 4% growth by the last quarter of next year, the letter said. Prime Minister Chuan Leekpai told reporters, ''A 0 to 1% growth rate for next year is not an excessive expectation. But much depends on external economies.'' ''If regional economies contracted, the Thai economy would be adversely affected. It would be unavoidable,'' he said. Chuan also said that the expanded budget deficit will help stimulate the economy ''only to a certain level.'' ''In fact, the most important factor for sustainable growth is to revive the financial sector so that the real estate sector can get proper loans,'' he said. In the last letter of intent agreed to in late August this year, Thailand set the nation's budget deficit at 3% of GDP. Finance Minister Tarrin Nimmanahaeminda said the latest increase will be spent on maximizing domestic demand and the social safety net. Half of the additional budget deficit has been earmarked for social programs and related labor-intensive investment projects, the finance minister said, adding the expenditures would be foreign financed. ''The government will raise cash spending by another 0.5% of GDP...while another 0.5% of GDP will accommodate revenue shortfalls,'' Tarrin said. The expanded budget deficit will allow the government to inject an additional 250 billion baht into the economy, he said. ''We are confident that this deficit can be quickly scaled back once growth resumes, thus preserving the medium-term strength of Thailand's fiscal position,'' the letter of intent said. The IMF will decide Dec. 16 on the next disbursement, Tarrin said.
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|Publication:||Asian Economic News|
|Date:||Dec 7, 1998|
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