Academics predict that China’s economic crisis will affect Thailand and ASEAN. Inflation in the United States Still high, delaying cuts in interest rates If the Thai economy is growing much below its potential It is expected that the government may have to move the ceiling. Obligations under Section 28 are 35% of the future budget if quasi-fiscal measures are needed to take extra care of the economy, borrowing 170 billion baht from BAAC Bank, supporting the distribution of digital wallets to farmers. There is plenty of liquidity. But the Treasury must have a clear compensation plan of at least 40-50 billion per year, offer guidelines and 5 conditions to manage risks and achieve economic goals in both growth dimensions. Equity dimension and financial risk management
14 April 2024 Professor Dr. Anusorn Thamjai, former member of the Public Debt Management Policy and Supervision Committee of the Ministry of Finance and former Director and Chairman of the Risk Management Committee of the Bank for Agriculture and Agricultural Cooperatives (BAAC) revealed that the crisis situation in the real estate and financial sectors China has spread to other industrial businesses. Although the Chinese government has implemented financial and fiscal relief measures, they have not been able to solve the problem, only alleviate the crisis from spreading into a serious economic decline and a state of chronic deflation. The crisis in China’s real estate and financial sectors is the result of overinvestment. There is a lot of excess supply. There is speculation inflating the real estate price bubble. Meanwhile, demand has fallen sharply during the COVID outbreak and strict lockdowns. The Chinese government has been clashing with real estate developers over debts and speculative behavior in the real estate market since 2021, but the actions have been too slow, the speculative bubble situation in the real estate market and the problem of hidden bad debts financially. institutions and shadow banking have spread beyond normal measures.
Eventually, major real estate developers defaulted on their debts. and has entered the bankruptcy process since then “Evergrande” to “Country Garden” and, most recently, China Aoyuan, which is headquartered in Guangzhou. There is a total of about 6 billion dollars in foreign debt (over 200 billion baht) that has defaulted on debt and has initiated bankruptcy proceedings by filing for bankruptcy protection in the United States. Real estate sales continue to plummet. Bankruptcies in the real estate sector have put pressure on China’s financial sector and financial markets, and have had a ripple effect on the building materials industry. steel industry cement industry Chinese foreign direct investment (FDI) is expected to fall by more than 20% this year as many international companies consider diversifying their supply chains and take steps to reduce their reliance on manufacturing bases in China from the effects of the trade war and trade protection measures. China must choose more economic reform and restructuring measures. We can no longer rely on economic stimulus policies that have worked in the past.
The consequences of economic reform and restructuring Disposal of Chinese products Expansion of China’s supply chain in ASEAN All of these have an inevitable impact on the economy of Thailand and the region, both positive and negative In addition, there is no policy interest rate cut in the country Thai at the moment. But that is expected throughout the year There is likely to be a reduction in the policy interest rate by the policy committee of the Bank of Thailand at least 1-2 times The US March Consumer Price Index is still rising. Headline inflation is at 3.5%, making the prospect of a Federal Reserve rate cut in June less likely. So the difference between the US dollar interest rate and the baht interest rate is not a factor that determines capital movements, especially foreign direct investment. Risk-adjusted investment return factors Human capital quality factors Economic infrastructure readiness factors Institutional factors And the stability of the political system is more important than the difference in interest rates Thai economy, ASEAN economy. China’s economy is a single supply chain and is highly interdependent. When China’s economy slowed down significantly It will have an impact on Thailand and the region. This factor will ultimately put pressure on Thailand’s rate of economic recovery and expansion.
It is expected that the government may have to move the ceiling. The obligation under Section 28 is 35% of the future budget if additional quasi-fiscal measures are needed to look after the economy. Because using liquidity and borrowing money from the BAAC for use in the 10,000 baht digital money distribution project will cause the obligation under Section 28 to reach the upper limit of 32% of the budget, which is a ceiling that has moved down from the previous level of 35%. Repayment of the remaining burden according to Section 28 in the amount of 104,472 million baht, accounting for 3.28% of the annual budget. By the end of the financial year 2023, the outstanding debt under Section 28 may not exceed 32% as determined by the committee. If we go back to the end of 2022, the Prayut government has extended the debt limit in Section 28 of the Public Sector Financial Discipline Act. As for the government’s debt to budget ratio, it was temporarily changed from 30% to 35% for a year before being adjusted to 32%, but he expected that if the Thai economy cannot expand to its full potential at a level 5. -6%, the Settha government may need to move the ceiling to 35% again in order to create commitments, use additional budget money or semi-fiscal measures to take care of the economy in the future.
Professor Dr Anusorn said that BAAC is a specialist financial institution from the state that must carry out its mission as stated by law and respond to government policies that come to carry out its duties in all periods supporting measures to intervene in agricultural product prices to help farmers in accordance with the income guarantee policy. Pledge of agricultural produce Continuous support of various funds to help farmers in accordance with the policies of different governments. Use the BAAC’s remaining liquidity to support the digital wallet distribution project or borrow 170 billion from the BAAC to implement such measures. This can be done under the following conditions.
Firstly, there must be confidence that the BAAC has sufficient liquidity to support such projects without affecting the liquidity of the BAAC in carrying out its important missions.
Secondly, it must create confidence in the operations of the BAAC and not take more deposits or liquidity from the BAAC than usual.
Third, there is a clear separation of accounting records between accounts for normal operations and accounts for operations to support government policy, especially the policy for issuing 10,000 baht digital wallets.
Fourthly, a plan was made to reimburse and compensate farmers for the profits from the digital currency distribution. By requiring the Ministry of Finance to clearly allocate a budget for compensation and reimbursement to the BAAC of at least 40-50 billion per year if it can support the issuance of 10,000 baht digital currency in accordance with the law and Good risk management There will be no problems with the BAAC’s financial status and it can continue to support such policies. The aim of establishing the BAAC is to have a financial institution to provide financial support to farmers, farmer groups, or agricultural cooperatives, therefore, the money that farmers receive from the BAAC should be money that can be used for occupations to increase income. Use it to develop knowledge in agriculture or develop knowledge or use it to pursue other careers to increase your income and improve your own quality of life.
Fifth, the distribution of digital wallets. By using BAAC’s liquidity, it implements quasi-fiscal measures and creates obligations through government agencies. Such operations must be within the framework of Section 28 of the Financial Discipline and State Finance Act. which is a section specified for Controlling government spending beyond its means The government can raise the debt ceiling and obligations under Section 28 of the Financial Discipline Law from 32% to 35% of the budget. If it is necessary to use money outside the budget to take care of the people or solve economic problems. But be aware that these obligations will become public debt if the government cannot collect taxes or raise additional revenue in the future.
Assoc. Prof. Dr. Anusorn He further offered an opinion on allowing the state’s specialized financial institutions to carry out activities, measures, or support state policies. Then gradually set a budget to compensate state enterprises for expenses and income later in accordance with Section 28. This is considered “non-budget money” as a “semi-fiscal measure” (semi-fiscal measures), so it is not the amount used is included in public debt for the first time This may cause an underestimation of the public debt At the end of 2024, the government will get the BAAC to take care of the 17 million people who are farmers through a Section 28 year mechanism financial 2025. It can go ahead but the proposed guidelines and the 5 conditions for risk management under Good Governance will enable the measures to achieve economic goals in both growth dimensions. The dimension is fair and does not cause additional financial risks in the future.
#Academics #point #BAAC #loan #worth #billion #distribute #digital #wallets #Treasury #compensate #billion #year
.jpg?fit=300%2C300&ssl=1)
