Fiscal Policy in Response to Climate Variability in Thailand

Abstract

This study employed the regression-based measure of discretionary changes in fiscal policy to examine fiscal spending in response to economic cycles and non-economic shocks in Thailand, particularly in climate variability. In response to economic cycles, the discretionary component of fiscal policy within the Thai government has generally been pro-cyclical. However, the overall effects of fiscal responses in terms of discretionary and non-discretionary government budgetary expenditures show a neutral stance. At the disaggregated ministry-level, five out of six ministries selected in the study illustrate a neutral fiscal spending behaviour. The effects of climate variability are mostly silent on the use of fiscal policy discretion and on total government budget expenditures, but have some impacts on budget formulation at the line-ministry level. However, the associations are often not indicative, and may even oppose expectations, of the government allocating higher budget appropriation in cases of increasing climate variability.