The Finance Ministry is considering granting extra incentives for projects that will start investment soon.
The strategy is part of its efforts to trigger a private investment spree at a time when Thailand is in dire need of fresh investment to boost the lacklustre economy.
The special incentives must make the private sector feel that starting investment right now is more worthwhile than doing so in the future, Finance Minister Apisak Tantivorawong told the Fiscal Policy Office's annual symposium yesterday.
Thailand is scrambling to escape an economic slowdown, cramped by both internal and external factors. Even though the government has tried to accelerate public spending on infrastructure projects, such initiatives have failed to trigger a crowding-in effect.
Amid growing risks from China's slowdown to export-dependent countries including Thailand, the new economic team led by Deputy Prime Minister Somkid Jatusripitak has stepped up attempts to stimulate the economy.
According to the National Economic and Social Development Board, private investment in the second quarter fell 3.4% year-on-year, down from the first quarter's 3.6% growth, while the manufacturing production index dropped for a fourth straight month in June to its lowest level in 15 months. The 8% contraction followed a 7.6% fall in May.
Extra incentives for new investment are expected to be launched after the government introduces stimulus measures aimed at helping grass-roots people and warding off downside risks to growth, Mr Apisak said.
Apisak: Low incomes hurting confidence
He said falling incomes of grass-roots people, caused by low farm prices, drought and cutting overtime payments in the manufacturing sector due to reductions in production capacity, were the main factor eroding consumer and investor confidence.
Providing money for low earners and investment in small projects can bring results in the short term, Mr Apisak said.
The stimulus measures will include an interest-free loan to Village Funds.
The new cash for Village Funds is expected to be taken out within a month, while investment in small projects would be drawn down in three or four months, Mr Apisak said.
A Finance Ministry source said the ministry would use state-owned banks as sources of funding for the 40-billion-baht loan to the Village Funds.
The five-year loan will be interest-free for the first two years, then the rate will be relatively low for the remaining term.
Village Funds are required to charge their members a low interest rate, with no interest for the first six to 12 months, while the ministry will subsidise 2% interest to the state-owned banks.
Meanwhile, MR Chatu Mongol Sonakul, a former Bank of Thailand governor and finance permanent secretary, said the government could use Section 44 of the interim constitution to implement short-term stimulus measures and move ahead with its infrastructure projects.
He also urged the central bank to consider conducting a study of whether a weaker baht could help to shore up GDP.
"The logic is simple. Thailand's population is 67 million and the world's population 7 billion, so a depreciating currency would help the sales of Thai exports to the 7 billion people," MR Chatu Mongol said.
"When the baht appreciates, we could sell the products domestically."
But a plan aimed at depreciating the baht is not expected to be implemented by newly appointed central bank governor Veerathai Santiprabhob, as he was picked by a committee that does not support such a move, he said.
Vichit Suraphongchai, executive director of Siam Commercial Bank, disagreed that a weaker baht would really help economic growth, citing how Japan's devaluation had not solved its problems.
"Currency devaluation leading to GDP growth depends on economic structure," he said.