It was announced. It’s not a surprise.
The thai government is injecting money into the economy, in order to boost the growth, and to compensate a private consumption and investments still weak. That explains the mantra about the “mega projects”.
Let’s study the “Government consumption” (one of the component of the GDP), with a breakup between “wages” and “purchases”. Datas from NESDB.
The boost is clearly visible on the last 2 quarters of 2007
On Q4, Government consumption increased by 25,5 %, compare to Q4 2006, and by 10 % compare to Q3 2007 !
In october, the government gave for instance a 4 % salary increase to all civil servants. But it’s interesting to note that between Q3 and Q4… the total wages increased by much more (10 % ).
And it’s not finished.
If you look at the details of the Gross Fixed Capital Formation (= new investments, other component of GDP)… we can see that the government is also pouring money.
One sector is traditional for public “interventions” : construction.
On 2007, “Construction”expenses represented 32 % of the total Gross Fixed Capital Formation. That’s not tiny.
On this second chart, we can see that Government Construction (expenses on new buildings and other construction) continue to increase, when Private Construction is decreasing (on Q4), and stay superior in value.
Overall, the datas available about GDP do not allow us to find the exact total amount of money the government is injecting into the economy (for instance, on Q4 we had a large import for “transportation”…. that was of course public investment, with new airplanes and trains).
One way would be to look at the… budget deficit (AKA the fiscal position of the government).
One thing is sure : these public expenses are likely to continue. It gives a good feeling on the short term, like a quick fix for dope addict… It pays a political dividend… But after ?
For instance, to increase wages of civil servants will just fuel… inflation.
What will happen if the export engine stop ? And that private consumption and investments remain depressed ?
0 Responses to “Chart, GDP : sharp increase of government expenditures”