Government spending can be classified into two types: 1) current expenditure (i.e. wage
and salary, goods and services expenditure, interest payments and subsidies, and current transfers),
and 2) capital expenditure (i.e. acquisition of fixed capital assets, capital transfers, and loan). The
data from the Bank of Thailand show that during 1995-2004 the average proportion of national
actual expenditure on the national product was 16.91% per quarter. The current expenditure
proportion on total government spending increased from 69.70% in the first quarter of year 1995
to 76.83% in the third quarter of 2004. The government thus had to reduce capital expenditure from
30.30% to 23.17% for the respective time period. An increase of current expenditure can improve
consumers’ purchasing power. This would increase the aggregate demand and thus stimulate
economic growth. On the other hand, capital investments would contribute to technological progress
and raise the level of national production in the long run.