Thailand’s financial risk ‘low’ this year but 6 possible pitfalls: Ministry
Thailand’s financial risk for fiscal year 2023 is low but revenue collection faces six challenges, according to the Finance Ministry report issued at the weekly Cabinet meeting on Tuesday.
The report estimated low risk for government revenue collection, as the Thai economy is on an upward trend from last year, said government spokesman Anucha Burapachaisri.
Last year the government collected 2.53 billion baht in revenue, a rise of 6.57% year on year.
The ministry projected that revenue from energy and international trade would expand from the previous year but remain lower than the pre-Covid-19 level.
Overall financial status of commercial banks would remain strong. However, Thailand’s ratio of capital to risky assets is still higher than the international standard, the report said. Commercial banks are likely to record overall higher quality loans in 2023 thanks to debt restructuring and management programmes.
The Finance Ministry however highlighted risks in six areas for state agencies:
1. The Social Security Fund would drop from last year as its assets fall in value due to market trends and smaller contributions from employers and employees under Sections 33, 39, and 40 of the Social Security Act. Also, the declining birth rate and ageing society means fewer new workers will enter the social security system.
2. A bigger state contribution to the National Savings Fund and disbursement of pensions to retirees in 2023 could put the government at financial risk if the fund fails to achieve the turnover ratio it has guaranteed.
3. The Oil Fuel Fund is heavily in deficit due to high global energy prices, while the government continues to subsidise diesel and LPG prices to soften impacts on the public. The Finance Ministry believes that the global energy price will ease this year and allow the fund to pay back some of its debts.
4. Overall status of specialised financial institutes will remain stable this year. However, the ministry suggested that debt levels of the Bank for Agriculture and Agricultural Cooperatives be monitored closely as the bank’s debt moratorium programmes ended last year but many of its customers are still suffering fallout from Covid-19.
5. Overall revenue contribution from state enterprises will drop from last year, especially among electricity agencies. This is mainly due to the government’s policy of capping the fuel tariff (Ft) to reduce financial burdens for businesses and households.
6. The insurance sector is likely to be affected by increasing Covid-19 insurance claims, which are estimated to be high compared to the current balance of the General Insurance Fund. However, since insurance payouts are often disbursed in installments, the ministry believes the fund and insurance businesses can manage customer claims, or at least limit the impact to their sector only.
