The three measures in the new economic stimulus package worth a combined 110 billion baht are expected to contribute an additional 0.4% to economic growth this year.
The measures include a 59-billion-baht interest-free loan to grass-roots people through 59,000 Village Funds ranked grade A and B, a 35-billion-baht budget to 7,000 tambons nationwide for construction and repair work and accelerated 16-billion-baht budget disbursements for small projects below 1 million baht, a source said.
The stimulus measures are slated for cabinet approval next Tuesday.
The new economic ministers’ priority is putting money into the pockets of low-income earners who have been hit by soft agricultural prices amid the stuttering economy.
The economic team led by Deputy Prime Minister Somkid Jatusripitak is focusing on a domestic-driven model, as the export outlook remains bleak following China’s slowdown.
The state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC) and the Government Savings Bank (GSB) will be the lenders for the five-year term loan to 59,000 Village Funds at 1 million baht each. They will offer interest-free loans for the first two years, while the government will subsidise 2.2 billion baht for the two-year interest-free loans by both banks.
The BAAC and the GSB will charge Village Funds based on their financial costs for the remaining three years, the source said.
Low-income earners in rural areas are prohibited from borrowing from the 59-billion-baht fund to refinance debt to ensure such money will actually be injected into the economy. Lending through Village Funds is believed to be a tool in directing money to rural people, and the Finance Ministry has asked the Village and Urban Revolving Fund to set conditions for loans.
The source said the Interior Ministry would be responsible for injecting the 35-billion-baht budget for repair and construction work to 7,000 tambons nationwide. Each tambon will receive 5 million baht for any project related to building or repairs in the area.
Ekniti Nitithanprapas, international economic policy adviser to the Fiscal Policy Office (FPO), said that the government’s new economic stimulus package was expected to offset any impact from the Erawan Shrine bombing and help to achieve this year's 3% growth forecast.
Public spending and investment account for a mere 20% of GDP, while exports represent 77%.
Earlier, the National Economic and Social Development Board said the economy was likely to fare better in the second half than the 2.9% growth recorded in the first half thanks to improving public investment, accelerated budget disbursement and rising tourism.
Mr Ekniti said injecting money directly to low-income earners would create a multiplier effect.
Regarding the impact of the Ratchaprasong bombing on tourism, the FPO estimates 300,000 foreign tourists will be wiped from its full-year forecast of 29.9 million arrivals, and this will shave a mere 0.05% off the country’s economic growth, he said.
The FPO is confident the impact on tourism will be minimal. Arrivals from Aug 18-27 expanded by 10% year-on-year, down from 33% growth year-to-date as of Aug 17, the day of the blast.