Given the government's strong base of support in parliament, approval of the fiscal 2027 budget bill proceeded smoothly…

Given the government's strong base of support in parliament, approval of the fiscal 2027 budget bill proceeded smoothly during the first reading earlier this month.

This momentum was reinforced by the Constitutional Court's ruling last week that the 400-billion-baht loan decree did not contravene the constitution, dispelling any concerns about additional borrowing this year.

However, these developments have not eased business concerns over budget allocation, particularly the heavy burden of recurring expenditure while investment spending remains limited, potentially undermining the country's long-term competitiveness.

NECESSARY REFORM

The government's investment budget should be raised to 25-35% of total annual expenditure to help transform the country, according to a think tank.

However, this is impossible without bureaucratic reform, reducing the size of the public sector, improving its efficiency, and simultaneously cutting unnecessary government spending, said Nonarit Bisonyabut, a research fellow at Thailand Development Research Institute.

The government's investment budget in fiscal 2027 accounts for 20.8% of total expenditure, which is considered relatively low.

However, reaching that target will be extremely difficult unless Thailand reviews and rethinks the role of the bureaucracy, including the functions government should perform and whether some activities are no longer needed, he noted.

This effort requires limiting the discretionary authority of government agencies and making greater use of artificial intelligence (AI) and digital automation to handle routine, manual administrative tasks, said Mr Nonarit. These strategies would reduce the size of the public sector and free up more fiscal resources for productive investment.

In addition, he argued that government cash handouts and populist measures that do not promote long-term structural adjustment should be reconsidered. Examples include various forms of agricultural support, such as pledging schemes, price guarantees, interest rate subsidies and debt moratoriums.

These programmes represent spending that is quickly exhausted without helping beneficiaries to adapt or generate sustainable future income. As a result, they constrain the government's ability to increase the share of the budget allocated to productive investment.

Another category of expenditure that is classified as investment budget but does not genuinely constitute investment in the country's future is canal dredging projects intended to support farmers. In practice, the excavated soil is simply piled along the banks and the canals must be dredged again a few years later, said Mr Nonarit.

Likewise, spending on road repairs and construction is categorised as investment to improve transport. In reality, these projects often become recurring expenditures -- the country keeps repairing and rebuilding the same infrastructure instead of investing in new priorities.

A genuine investment should generate lasting benefits over 5-10 years, rather than requiring constant repairs, or in some cases, remaining perpetually unfinished, he noted.

Instead of creating sustainable value, such spending becomes fragmented, short-term expenditure that resembles consumption, despite being classified as investment, said Mr Nonarit.

The same concern applies to training programmes that are promoted as initiatives to improve skills, strengthen human capital, or empower small and medium-sized enterprises.

In many cases, they fail to produce lasting outcomes. Small businesses do not successfully grow into medium-sized or large enterprises that can generate higher tax revenues, meaning the returns do not justify the public funds spent on skill development, he said.

In different periods, Mr Nonarit noted certain buzzwords tend to make it easier for projects to secure budget approval, such as digital, application and integration.

"Today, simply including the term AI has become something of a magic word to obtain budget approval. Whether such projects actually deliver sustainable, long-term benefits remains an open question," he said.

"Another major component of the budget that has become a significant fiscal burden is spending on universal welfare programmes, which may not effectively reach the individuals who genuinely require assistance. The government should shift from a universal approach to a targeted welfare system, focusing support on those who truly need it to improve the efficiency of public spending while reducing the government's expenditure."

OPTIONS AMID CONSTRAINTS

The Federation of Thai Industries (FTI) called on the government to prioritise long-term economic restructuring in the fiscal 2027 budget, warning that short-term fixes could undermine Thailand's competitiveness in the years ahead.

Pimjai Leeissaranukul, chairwoman of the FTI, said the budget should serve as a tool to transform the country's economic structure rather than being spread thin across immediate, isolated problems.

"The key issue is not how much money is spent, but whether the spending truly changes the economic structure," she said.

While acknowledging the government's fiscal constraints such as rising regular expenditures and the need to maintain financial discipline, Mrs Pimjai noted investment should focus on projects that deliver measurable results such as lifting productivity, reducing costs, creating jobs, increasing business income and enhancing national capabilities.

She cautioned against allocating funds without clear priorities.

The FTI urged the state to stimulate growth by bringing more businesses into the tax system fairly, using digital tools to curb revenue leakages, and promoting high-value industries instead of imposing tax hikes that could burden manufacturers.

Transparency and accountability should be emphasised, said Mrs Pimjai, calling for clear performance indicators and public disclosure of progress on major projects to ensure spending translates into real benefits.

In addition, she recommended cutting state costs through civil service reform and a shift towards digital government.

Streamlining processes, reducing paperwork and integrating databases would not only lower state spending, but also ease hidden costs for businesses, Mrs Pimjai said.

The fiscal 2027 budget is set at 3.788 trillion baht, up 0.2% from the previous year. Net revenue is projected at 3.0 trillion baht, leaving a deficit of 788 billion baht, roughly 3.8% of GDP.

Regular expenditure is expected to rise by 5%, accounting for 73.6% of the budget, while investment spending dips by 8.4%, making up 20.8% of allocations.

STATE-LED INVESTMENT

The government should allot more of its budget to new investment projects to stimulate the economy, said Chaichalerm Bunyanuwat, president of the EAF Long Product Steel Producers Association.

Mr Chaichalerm praised the government's efforts to align budget planning with economic conditions, but insisted proactive measures are needed.

State-led projects would encourage private sector initiatives by strengthening investor confidence, he said.

"If government projects move forward, private projects will follow because confidence increases," said Mr Chaichalerm.

Thailand's steel industry is reliant on state projects such as new developments, related initiatives or repair and maintenance work. Government projects account for 60% of steel usage, while private projects represent only 40%.

He urged the government to mandate the use of domestically produced steel in all state projects as it would support local manufacturers who are struggling with high energy costs and competition from imported steel flooding the market.

In addition to securing approval on the first reading for the 2027 budget bill, the government was backed by the Constitutional Court for its 400-billion-baht loan decree. Chanat Katanyu

MAXIMISE LIMITED FUNDS

Visit Limlurcha, vice-chairman of the Thai Chamber of Commerce, said high recurring expenditures, accounting for more than 70% of the fiscal budget, leave Thailand with limited funds for investment and development.

"The remaining resources must be used as efficiently as possible. Every baht of public spending must deliver maximum value," he said.

"It is time to reassess the efficiency of government agencies and their civil officials."

Mr Visit said efficiency is essential to effective public administration. With the adoption of modern technology and AI, many tasks can be completed instantly without requiring additional manpower. This shift improves efficiency and enhances transparency within government operations and public services.

"Technology and AI can replace many human tasks and should help reduce government expenditure," he said.

Integrating technology into public services reduces face-to-face interactions with officials, particularly for processes requiring discretionary judgement. Using AI to verify documents would help to curb corruption, said Mr Visit.

In addition, a stronger business structure needs to be developed, he said, urging the government to enhance public services, enabling both individuals and businesses to access them more quickly and conveniently, reducing costs and travel expenses.

Government services, including permit applications and the issuance of official certificates, should be digitalised as much as possible, noted Mr Visit.

Investments should be directed towards projects that genuinely meet national priorities in order to support business growth, which in turn expands the government's revenue base, he said.

Thailand's infrastructure development previously relied heavily on government spending.

However, with limited public funds, the government may only be able to finance certain projects on its own, noted Mr Visit.

Some projects such as railways may need private sector participation or concession arrangements through competitive bidding. Infrastructure development should be financed through a variety of funding sources, he said.

"Given the government's fiscal constraints, a hybrid investment model will likely be necessary," said Mr Visit.