"Phachara" pointed out that the results of the US midterm elections send strong shocks to Thailand's debt issues, affecting both interest rates and exports. He recommended having a clear plan to reduce the budget deficit to manage the volatility of external impacts, suggesting four urgent measures to implement.
Phachara Naripthaphan, a member of the Securities and Exchange Commission (SEC), revealed the impact of the upcoming US midterm election results, which are likely to see the Democratic Party win majorities in both houses. He said this is a critical warning for Thailand to urgently set a clear path for reducing the budget deficit, as the outcome will directly affect borrowing costs and economic growth—two key factors determining the public debt-to-GDP ratio.
Phachara noted that many may consider US politics distant, but regarding public debt, it is directly connected because US government bond yields form the basis for global financing costs. Moreover, US tariff policies directly impact Thailand’s export sector. If Democrats control both houses, the US economy may slow but fiscal discipline will improve, helping bond yields stabilize. However, foreign policy powers and tariffs remain under the president’s control, so geopolitical risks persist.
Turning to domestic conditions, the Public Debt Management Office (PDMO) estimates Thailand’s public debt will be around 68% of GDP in fiscal year 2026, rising above 69% the following year, and peaking near the legal debt ceiling of 70% in fiscal year 2028. Meanwhile, the fiscal year 2027 budget deficit is projected at 3.9% of GDP amid Thai economic growth expected to be under 2.5% per year.
Phachara pointed out that although Thailand’s debt structure is fairly strong, and the PDMO has started shifting to short-term borrowing such as treasury bills to delay issuing long-term bonds amid rising interest rates, economic growth only slightly exceeds interest rates, providing little downward pressure on the debt ratio. Short-term borrowing is thus a temporary fix that carries rollover risks if global interest rates stay high and exports weaken. Financial costs will gradually deepen, making public debt rise more easily than expected.
To build resilience and regain market confidence, Phachara proposed four urgent measures for the government to consider:
1. Announce an annual budget deficit reduction path: Set clear targets with mechanisms to review based on external volatility, assuring markets there is a plan to manage the debt peak in fiscal year 2028.
2. Control the proportion of short-term borrowing: Plan to gradually return to issuing long-term bonds once market conditions stabilize, preventing debt rollover burdens from concentrating during volatile financial periods.
3. Focus on increasing revenues and investing in high-return projects: Use borrowed funds for projects that genuinely stimulate the economy and have measurable outcomes. Accelerate tax base expansion, eliminate gray and nominee businesses, and plan new revenue sources to compensate for tax losses from the transition to electric vehicles (EVs).
4. Diversify export markets and trade relationship centers: Leverage Thailand’s position as a medium power to build relations with multiple powers, spreading risks and reducing dependence on trade policies from any single country.
Phachara emphasized that while Thailand cannot choose the US election outcome, it can choose to prepare in advance. If the government has a clear and actionable blueprint to reduce the budget deficit, external shocks can be managed without letting the country's public debt trajectory slip beyond control.