State agencies fail to hit contract targets
Delays in government spending recently compelled the Bank of Thailand to lower its economic growth forecast for 2015 from a previously projected four percent to 3.8 percent. That led to the Monetary Policy Committee reducing the policy rate by 25 basis points, to 1.75 percent, for the first time in a year.
As at the end of March this year it was reported that state agencies had signed just 43.9 percent of the 449 billion baht investment budget available for this fiscal year. In monetary terms this amounted to just 197 billion baht being allocated in the six months of this fiscal year. This was well short of the 80 percent target which had been set by the government. This means the possibility of further delays in public investment are almost certain, leading to a possible slower economic turnaround than previously hoped.
At the end of the first six months of the fiscal year 31.1 percent of the public investment budget had been drawn down. By way of comparison, by the same time frame in 2014 a total of 31 percent had been drawn down. Basically, the numbers are virtually the same.
Nonetheless, the government has stated it expects to have disbursed 96 percent of its regular budget by the end of September this year and is aiming at an 87 percent disbursement of the investment budget at the same time.
The Comptroller General’s Department has said it will meet with those state agencies who have fallen well behind disbursement targets and will seek ways of accelerating the process.
The government of prime minister Prayut Chan-Ocha has stated that how the investment budget is disbursed was one of the major indicators for evaluating the performance of the heads of the various state agencies.
The government has long believed the major driver of economic growth in the present climate is to ramp up public spending and any delays in signing contracts and disbursing the necessary funds will simply retard that economic recovery and growth.
Investment projects that had not managed to settle their procurement contracts by the end of March this year were unlikely to take out their budget within the confines of the fiscal year, based on the way the budget process is conducted.
This, in turn, means the monies allocated by the government will not be dispersed and therefore will remain idle and basically can provide no help in terms of driving economic growth and further investment. It is even possible that the Bank of Thailand may be forced to further reduce its economic growth forecast, although that possibility will not become clear for a few months yet.