The Thai public debt has increased and is at risk of reaching the debt ceiling in 10 years.

The “public debt problem” has become a worrying problem for the entire Thai nation. Last month, research analyzed the trend that Thailand will have a chance of touching the ceiling of public debt of 70% to GDP within 10 years.

Last month, KKP Research by Kiatnakinpat Financial Business Group released a study on the Thai public debt problem that the Thai government will have to face more challenges due to rising debt levels after the COVID-19 crisis and structural fiscal deficits over the past 15 years, which are likely to worsen with rising interest rates and aging society. In addition, Thailand’s economic growth potential is likely to continue to decline.

The problem of structural fiscal deficits, chronic deficits

According to KPP Research, the Thai government has had a ‘structural deficit’ or income is less than expenditure for more than 15 years, with an average annual fiscal deficit of 2.8 % of GDP and Thai public debt growing by 7-8 % annually.


There are three important factors that cause Thailand to have public debt problems:


  1. The revenue collection of the Thai government is low. There are many factors that Thailand collects low tax revenues, such as the large informal economy. Most workers are self-employed and non-taxable. The VAT rate is relatively low compared to other countries.
  2. The proportion of fixed expenditures is high at 80%. On the other hand, only 20% of the total budget is allocated and only about 14% of the total disbursement budget is spent on investment. This is partly due to delays in investment projects that keep Thailand’s disbursement budget in investment low. It can be seen that Thailand’s budget allocation may help support economic growth in the long run.
  3. The increasing entry into the elderly society has led to a higher fiscal deficit due to the government’s lower tax revenue collection, particularly VAT, personal income tax, and corporate income tax. At the same time, government expenditures such as welfare and social welfare will increase in the future.

Effects if there is no fiscal discipline

Past experience in many countries indicates that fiscal management and failure to resolve serious problems will result in high public debt and could affect the economy in three ways:

1. Fiscal policy execution capability (fiscal space) has decreased

Thailand’s public debt has never dropped to a pre-crisis level. When compared to the COVID period, the government has incurred a debt of nearly 20% of GDP, which poses a risk that the government will not be able to fully support the economy if any crisis occurs in the future.

2. The government’s borrowing cost may rise

Due to the decrease in credibility, if the government creates high debts, spends excessively, and does not have clear plans to increase fiscal capacity, investors may seek higher returns to offset the risk premium.

3. The outflow of foreign capital, including domestic capital

The depreciation of the currency and rising inflation, particularly in countries with high foreign-denominated loans and countries that rely heavily on imports.

The fiscal deficit has increased, the problem of public debt has increased

KKP Research suggests that although they can help stimulate the economy in the short term with subsidies, it will create long-term burdens for the state such as fiscal burden and public debt, making it more difficult to reduce public debt in the future.

KKP Research has calculated that implementing this subsidy policy will result in the public debt level reaching 70% within less than 10 years.

A huge challenge facing the Thai government.

It can be seen that the Thai government is facing more challenges in solving the public debt problem. Apart from rising debt levels after the COVID-19 crisis and aging society, Thailand’s continued fiscal deficit will likely continue to worsen the public debt problem.

With all of these challenges, the new government must find ways to reduce or control public debt under the new ceiling, while also seeking to invest money in stimulating the economy, making it sustainable, and reducing its dependence on borrowing.

Ultimately, the problem of public debt may come sooner than expected, and the solution may take longer than many people expect.

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