Thailand’s fiscal expenditure jumps highest since 2013 on aggressive government policy

Fiscal expenditure in Thailand surged highest in almost three years, following an aggressive government policy that was adopted to support the gloomy economy. Evidently, the government is also running some 2 percent in excess of its budget target for the nine months of fiscal year 2015-16 (Oct15-Jun16), reports said.

Fiscal expenditure of the Thailand government jumped 19 percent y/y in the second quarter of 2016. The economy has presented signs of a marked recovery in private sector demand this year. The private consumption index has been creeping up higher on sequential terms, DBS reported.

Moreover, retail sales have also picked up pace in the recent months, currently trending at 4 percent, after spending most of the past two years in the negative zone. Also, signs of improving inflation, back to 1 percent, remain encouraging as well.

With export growth set to be in the negative, the public sector needs to pick up speed. For GDP growth to come in above 3 percent this year, there is still a need to see strong public sector spending. Both private consumption and investment growth are likely to come in around 2.5 percent this year.

"For now, we estimate 5 percent and 14 percent growth in public sector consumption and investment respectively this year, resulting in overall GDP growth at 3.4 percent," DBS commented in its recent report.

Meanwhile, it is worth noting that private sector demand constitutes thrice the demand in the public sector, but contribution from the former is lagging behind the latter.