In today's struggling global markets, many national economies have looked to their government and foreign lenders for financial support, which translates to increased spending, borrowing and in most cases, growing national debt.
Deficit spending, government debt and private sector borrowing are the norm in most western countries, but due in part to the global financial crisis, some nations and economies are in considerably worse debt positions than others.
External debt is a measure of a nation's foreign liabilities, capital plus interest that a country must eventually pay. This number not only includes government debt, but also debt owed by the private sector and individuals.
A useful measure of a country's debt position is by comparing gross external debt to GDP, which offers a direct relation of a country's total debt to the size of its economy. The top 15 countries which have the highest level of external debts are Ireland, United Kingdom, Belgium, Hong Kong, Netherland, Switzerland, Austria, France, Denmark, Germany, Spain, Sweden, Finland, Norway, United States. The three highest indebted countries are Ireland, United Kingdom and Belgium which have external debt level to GDP of 811%, 336% and 327% respectively. The country that everyone suspects that it will be on top of the list is the United States which actually comes at the 15th place. It has the ratio of external debt to GDP of 95% but a staggering amount of gross external debt of $13.6 trillion. See the following table.
So, how does Thailand’s debt position compare to that of other countries? My study also finds that Thailand’s external debt position is still at a safe level. At the end of February, Thailand’s government debt position which includes direct borrowing and guarantees of both domestic and foreign liabilities stands at $100 billion. This is a vastly overstated figure as the majority of it (90%) is from guarantees and domestic debts and only the minority of it (10%) is from direct foreign borrowing. Meanwhile the Thai private sector owes about $50 billion in loans. When we combine the two sources, they add up to $150 billion in total. That is equal to 60 percent of GDP which is still significantly lower than many countries. Therefore, Thailand’s debt position is no where near a danger point or precarious level.
However, one can not look at country’s debts level alone to judge the health of its financial position. Country’s assets which include international reserves and natural resources should also be taken into account as they are indicators of debt servicing capacity.
BY Chodechai Suwanaporn
Source: Fiscal Policy Office / www.fpo.go.th