A NOTED economist and People’s MP warned today (June 21) that while Thailand’s current fiscal situation will not yet lead to a confidence crisis like Indonesia is facing, there is increasing risk this will be triggered if a concrete plan for fiscal rebalancing is not undertaken over the next one to two years.
Dr. Anusorn Thammajai, People’s MP for Bangkok, said while many economic indicators for Indonesia are better than Thailand, including public debt-to-GDP ratio being much lower than Thailand’s and first-quarter economic growth rate as high as 5.61%, implementation of several economic policies by Jakarta has caused a severe confidence crisis and raised doubts about the country’s future fiscal stability.
Indonesia has a problem with accumulated budget deficits plus a current account deficit since the Prabowo Subianto government came to power.
Many populist policies that violate the fiscal discipline framework have been implemented. There have been significant state interventions in the economy that go against market mechanisms, and nationalist policies related to resources.
Investors are concerned about governance and lack confidence in fiscal discipline. The dismissal of Finance Minister Sri Mulyani Indrawati, who strictly adhered to fiscal discipline, has raised questions. The neutrality and independence of the central bank’s monetary policy have also been questioned.
In May, President Prabowo Subianto announced the establishment of PT Danantara Sumberdaya Indonesia to act as a sole intermediary for exporting several key commodities such as coal and crude palm oil. This government intervention in the export market was viewed by investors as a severe market distortion, leading MSCI to signal a possible reclassification of Indonesia from an Emerging Market to a Frontier Market. This resulted in capital outflow, causing the Indonesian rupiah to depreciate sharply by over 8%.
The Indonesian stock market plummeted by over 32%.
When it comes to Thailand, Dr. Anusorn mentioned that the 2027 national budget will result in public debt of 69.36 percent of GDP, with this figure being only 0.64 percent below the fiscal discipline law ceiling of 70 percent.
If the economy grows even slightly below the target estimate, the debt will immediately exceed the ceiling. Under the 2027 budget Thailand will have to pay interest of 310.950 billion baht, but only repay the principal of 151.520 billion baht.
This means that the government is paying approximately twice as much interest as principal, and the interest payment burden is higher than the budget of many ministries. This is not good budget management or the management of public tax money.
“We are about to be mired in public debt. We will have to pay more taxes to pay off this debt, and increasingly burden future generations.
“If we calculate the interest payments on public debt, we find that Thai people collectively pay 852 million baht per day, 35 million baht per hour, or 592,000 baht per minute in interest on the country’s public debt.
“If we continue with populist policies, violate fiscal discipline, fail to reform government revenue, and incur more debt to the point where the debt ceiling has to be raised, we risk a fiscal crisis, leading to a crisis of confidence similar to Indonesia’s, with a plummeting currency and a crashing stock market in the future,” Dr. Anusorn said.
Moreover the budget preparation does not reflect sufficient effort to maintain fiscal discipline. At least 12 agencies received increased budgets but did not demonstrate efficiency or results in their work, and this may not be consistent with the 2027 budget plan.
A review and adjustment are necessary to align with the rapidly changing dynamics of globalised capitalism, he pointed out.
“Global geopolitics has changed, yet the government is still preparing a budget that is not much different from that of 2025/2026.
“Domestic factors have also changed significantly. The attempts by shady capital using Thailand as a base for money laundering continues to encroach on state power, and the government has not yet allocated a systematic budget to address this problem,” he said.
As the government is responsible for the quality of life and well-being of the people, this is not a matter of arbitrary granting or withholding welfare by the state as citing fiscal discipline to cut the budgets of certain agencies and ministries is a denial of the people’s basic welfare rights.
“If we talk about fiscal discipline, we must cut unnecessary expenses,” he said.
Even as the 2027 budget continues to provide welfare in many fragmented systems and Thailand has not yet faced a confidence crisis like Indonesia’s, if populist policies continue, the fiscal discipline framework is violated, government revenue not reformed, and debt increased to the point of needing to raise the debt ceiling. Thailand would then risk facing a fiscal crisis leading to a confidence crisis just like Indonesia, with a plummeting currency and a stock market crash.
Many measures under the government’s populist policies are inconsistent and unintegrated, he said, adding they employ a social welfare model that requires proof of poverty, and errors often occur in the screening process, controlled more by the discretion of those in power than by the legal rights of the people.
“Thai society still faces many problems, and the government must fight these problems under the supervision of this House of Representatives. The 2027 budget must guarantee quality medical treatment even without payment; guarantee access to quality education through budget allocation; guarantee access to clean air and clean water; guarantee sufficient quality food for survival; and ensure housing, preventing housing hardship.
“Cutting education and public health budgets does not create fiscal discipline, nor does it restore fiscal and economic stability. Instead, it exacerbates poverty and leads to the collapse of the public health system for the poor.
“Investing in a systematic social welfare system and reducing populist welfare programmes included in the 2027 budget will strengthen the foundations of democracy,” he said.
CAPTIONS:
Top and Front Page – A graphic image on debt by Karacis Studio on Unsplash
Insert – Dr, Anusorn Tamajai. Photo – Naewna
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