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Lessons from Thailand's Fiscal Policy

Author

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  • Bhanupong Nidhiprabha

    (Faculty of Economics Thammasat University)

Abstract

If rules of fiscal sustainability are observed, available fiscal space permits effective countercyclical fiscal programs. The importance of automatic fiscal stabilizers should not be underestimated. The discretionary impact of increased public spending and tax cuts can be amplified if implemented when consumer confidence investor sentiments are high. There is no evidence to support non-Keynesian effects of fiscal policy in Thailand. Unwarranted fears of unsustainable public debt and ultra-conservative fiscal policy has cost the country a lost opportunity for achieving high growth. After the military coups in 2006 and 2014, the Thai economy experienced the lowest economic growth among ASEAN countries. The budget spent on economic services was diverted into defense, increases in public sector's wages, and income transfer payments. The opportunistic political budget model predicts higher fiscal spending by incumbent democratic governments before an election to gain votes. In the case of Thailand, such spending comes after military coups, akin to a military business cycle spending.

Suggested Citation

  • Bhanupong Nidhiprabha, 2015. "Lessons from Thailand's Fiscal Policy," Asian Economic Papers, MIT Press, vol. 14(3), pages 110-125, Fall.
    • Handle: RePEc:tpr:asiaec:v:14:y:2015:i:3:p:110-125
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/ASEP_a_00384
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    Cited by:

    1. Bhanupong Nidhiprabha, 2016. "Impacts of Quantitative Monetary Easing Policy in the United States and Japan on the Thai Economy," The Developing Economies, Institute of Developing Economies, vol. 54(1), pages 80-102, March.
    2. Kawaura, Akihiko, 2018. "Generals in defense of allocation: Coups and military budgets in Thailand," Journal of Asian Economics, Elsevier, vol. 58(C), pages 72-78.

    More about this item

    Keywords

    Thailand; fiscal sustainability; automatic fiscal stabilizers;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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