Economics: Play Now then Pay Later as “Thai Tax” going up in 2-3 Years to finance current borrowing

By Pooky-this blog economics journalist

A private unit that keeps an objective track of Thailand’s public finances says in 2-3 years Thai tax will be heading up by about 10% as future government will have to find new finances to pay for the massive borrowing an spending by the Abhisit government.

“This government spending is bunched into construction and investments that will add little to future GDP growth leaving future government to have to increase tax to 30-35% to pay for the debt,” said the head of the unit, on TV tonight.

The Abhisit stimulus is raising all kinds of questions namely:

  • If the economy has recovered, why the need to borrow and spend massively?
  • Why are the funds going to thousands and thousands of small projects without an overall drive?
  • Why should Thailand keep focusing on exports when major economies will likely not be importing much in the next few years?
  • Why not stimulate internal consumption and agricultural sector directly?
  • Why so little funding for the creative Thailand initiative when the target is set very high?
  • Why so little fund to help Thailand SME re-structure.
  • Where is the macro-overall drive and direction needed to guide the spending?

“The borrowing and spending is expected to push Thailand’s public debt to GDP above the 60% level in a few years,” said the head of the unit.

The unit head added this is coming on top of greater private debt and household debt as the government is pushing massive lending onto the private sector and household. 

The unit also said free trade with “Zero” tax will put pressure on state income along with the need to keep Thailand competitive with other economies and also an ever increasing demand for agricultural price support will weaken public finance further.

“This government is borrowing and spending massively and at the same time, subsidizing everything left and right. How on earth will future government pay for all of this other than to raise tax and that will hurt GDP. It is a very worrying situation,” said the unit head.

Several economist have pointed out that Thailand never was able to pay its debt and have always relied on the economy to grow, making the debt smaller, but this time-“It looks like an over-extension.”

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