The Aftermath of Thailand’s Economic Crisis and Some Possible Ways Out

Abstract

Thailand has a considerable reputation for maintaining strong fiscal discipline. A key ingredient of the country’s fiscal policy is its strong built-in automatic stabiliser component. Such a so-called ‘automatic stabiliser’ effect was due to the fact that the country normally ran surpluses in high growth years and deficits in slow-growth years (see Figure 10.1). In times of economic expansion, the government normally operates a budget surplus to prevent the growth performance from over heating the economy and resulting in run away inflation. On the other hand, during times of economic downturn or economic slump, the government normally fosters a policy of budget deficits in order to provide appropriate cover for an economic setback. As a result, for a period of 20 years, from 1976 to 1996, the Thai economy grew at an average of 8 per cent annually, making it a relatively strong East Asian economy during this period.