BANGKOK, THAILAND – A leading expert raised the alarm and warned the government that a growing mountain of public debt could push the country toward a financial crash and a severe loss of confidence.
Expert warns of a looming debt trap
Economist Kriengsak Chareonwongsak from the Institute of Future Studies viewed the state finances with deep concern. He taught and conducted research on national development and said Thailand’s stability was in serious danger.
The government planned to raise the ceiling for new borrowing to 75 percent of economic output. The specialist firmly opposed this move and called for strict discipline in public spending.
Is Thailand heading for a steep fall?
Public debt already burdened the country with around 12.6 trillion baht, according to the expert. He said this amounted to more than 66 percent of the total economic output generated by citizens and businesses.
If the state took on a further 500 billion baht in debt, the debt ratio would climb close to the critical 70 percent mark. In his view, there would then be hardly any fiscal room left to respond to emergencies or new crises.
Debt squeeze threatens future growth
Debt was currently growing much faster than government revenue. This, the expert argued, weakened the willingness of companies to invest in new factories or jobs.
At the same time, Thailand’s society was aging rapidly, sharply increasing the costs of social security systems. Without iron fiscal discipline, the country was heading into a dead end, according to Kriengsak.
Taxes instead of fresh borrowing
Rather than constantly taking on new loans, the government should reform the tax system, he said. Unnecessary exemptions should be abolished and the collection of taxes should become much more effective.
According to the professor, public investments only made sense if they raised productivity on a lasting basis. He warned against using borrowed funds merely for short-term circulation in the economy.
Credibility on the line
If the government pushed ahead with its plans, international rating agencies could downgrade the country’s creditworthiness. That would make future borrowing more expensive and increase the burden on all citizens.
“The government should accelerate investment spending that boosts productivity. The core principle is that loans should be used to build and expand capacity, not for short-term circulation.”
said Kriengsak Chareonwongsak, economist at the Institute of Future Studies.