The government can raise the public debt ceiling if necessary

The fiscal position remains strong and it can raise its public debt ceiling if necessary, Finance Minister Arkhom Termpittayapaisith said on Wednesday as the country faces its worst Covid-19 outbreak to date.

Despite significant borrowing to finance the response to the epidemic, the country’s debt-to-gross domestic product (GDP) ratio was still low relative to its peers at 56%, and is expected to remain below its ceiling of 60% at the end of this fiscal year until September, said the minister.

“If it is necessary to increase our debt ceiling, the fiscal policy committee (…) can review and raise this threshold,” he told the Thailand Focus 2021 forum: Thriving in the Next Normal organized by the Thailand Stock Exchange.

The government will work hard to stimulate the economy, including gradually reopening the country, to maintain its GDP growth target of 4-5% next year, he said.

For 2021, the Ministry of Finance forecasts GDP growth of 1.3%, while the Bank of Thailand forecasts 0.7%. Last year, the economy contracted 6.1%, the biggest drop in more than two decades.

BoT Governor Sethaput Suthiwartnarueput told the virtual forum that bond yields in Thailand would be less exposed to “another taper tantrum” than those in some other emerging economies. A low level of external finance debt and high foreign exchange reserves mean that “we are very resistant to a balance of payments type shock,” he said.

Mr Sethaput joins Bank Indonesia Governor Perry Warjiyo in ruling out the possibility of a major local impact once the US Federal Reserve begins to loosen its policy of ease, unlike the hard knocks some have suffered. emerging markets in 2013. Investors are waiting for more clarity on the possible reduction in bond purchases. from Fed Chairman Jerome Powell’s scheduled speech on Friday or at the U.S. central bank meeting on September 21-22.

“The Thai bond market relies less on financing from non-residents than what we see in other countries. So the transmission from the global peak to the local peak is unlikely to be as sharp as in other countries, ”Mr. Sethaput said. “Even if this results in a spike in local performance, the transmission into the real economy is also likely to be dampened,” as 90% of Thai business financing is bank, he said.

Thailand’s economic rebound will remain uneven and bumpy as the nation grapples with a prolonged wave of Covid-19 and a late vaccine rollout, Mr Sethaput said. A slow recovery in the tourism sector will continue to weigh on the economy.

Currency problems

Down 8.8% against the dollar so far this year, the baht has fallen more than its Asian counterparts as Thailand slips into a current account deficit after years of surplus, the governor said. The shortfall has been estimated at $ 9 billion so far this year, but a healthy fiscal position, including high foreign exchange reserves, is seen as a buffer, he said.

According to the central bank’s monetary policy committee, the baht could suffer further losses and volatility due to domestic factors. The currency rose 1.4% on Tuesday on signs that the Covid epidemic in the country is easing, but hovered between gains and losses on Wednesday.