Third deficit in row for Thai budget on cards

Third deficit in row for Thai budget on cards

BANGKOK (Reuters): The Thai cabinet on Tuesday gave initial approval of a budget for the year ending September 2000 which features record deficit spending designed to speed up economic recovery.

The draft budget, expected to get parliamentary approval in the third quarter, would be the third straight annual deficit budget in a row for Thailand since it plunged into recession in mid-1997.

Analysts said the budget was a necessary tool although nearly half of the planned deficit spending would go towards state bailouts of private financial institutions.

"The budget is a...balancing act, one necessary if we are going to put the economy back on its feet," said Kitti Limsakul, an economics professor at Bangkok's Chulalongkorn University, adding it should help the government meet its 0.9 percent GDP growth target.

"What the government could do is to try to curb its regular administrative spending, failing which it may have to cut down civil servant payrolls in the future," she added.

The 860 billion baht (US$23 billion) budget for the coming fiscal year compares with 825 billion baht for 1998/1999.

The government plan to spend 110 billion baht more than its projected revenue next year was needed to ease adverse social impacts stemming from Thailand's deep recession, the Budget Bureau said.

The agency forecast that a big tax revenue shortfall in the current fiscal year would leave the government with a 95 billion baht budget deficit, much higher than the 25 billion baht anticipated earlier.

The draft budget will be reviewed further by state agencies before it is re-submitted to the cabinet for final approval on May 11. The revised version would then go to parliament for debate starting from June.

"To be in line with the economic forecast for 2000, it is still necessary to use government expenditure as a tool for stimulating the economy and easing human and social impacts that stem from the economic crisis," the Bureau said.

Finance Minister Tarrin Nimmanahaeminda said most of the 1999/2000 deficit would be financed by domestic borrowing.

Thailand's official think tank, the National Economic and Social Development Board (NESDB), said it expected the recession- hit economy to start recovering in 1999 and then show three percent growth in 2000.

The Thai economy shrank about 7.8 percent this year, according to the NESDB, slightly better than an 8.0 percent setback for the year seen by the Bank of Thailand and the IMF and compared with a 1.3 percent contraction in 1997.