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Business >> Saturday February 17, 2007
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McKinsey Quarterly
Global Insights

Deficit to continue into fiscal 2008

Wichit Chantanusornsiri

The fiscal 2008 budget is expected to show a deficit for the second straight year, according to Deputy Finance Minister Sommai Phasee.

"We expect that the economy next year will not be fully recovered, and that state revenues will fall short of expenditures," he said yesterday. "But any deficit will be manageable, and not over that of the current fiscal year."

The fiscal 2007 budget ending in September currently calls for expenditures of 1.566 trillion baht and a projected deficit of 142.6 billion, equal to around 2% of gross domestic product.

This year's deficit follows two years of balanced budgets under the ousted Thaksin Shinawatra government.

Mr Sommai said this year's budget deficit came as the government anticipated the need to boost state spending to stimulate the economy.

Economic growth this year is projected to drop to around 4% to 5%, compared with an estimated 5.1% in 2006.

"Typically, the government will look to run a deficit in its fiscal management. Budget surpluses are actually quite exceptional, as even when the economy is strong, we may need to run a deficit to continue to stimulate growth," Mr Sommai said.

A formal decision on the next budget framework has yet to be made by Finance Minister M.R. Pridiyathorn Devakula and Prime Minister Surayud Chulanont. The Finance Ministry is currently assessing economic trends to set a baseline for estimates of state revenues next year.

M.R. Pridiyathorn said funding estimates would be based on estimates for real economic growth of 5% and inflation rates of 3% in 2008.

For the first four months of fiscal 2007 from October to January, net government revenues totalled 400 billion baht, or 1% higher than the target and 11% higher than in the same period last year. Expenditures totalled 344 billion baht.

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