Low-interest loans and a six-months debt moratorium for small and medium-sized enterprises are the fulcrum of a new 1 trillion baht stimulus package to tackle the economic impact of the coronavirus outbreak announced on Tuesday.
The package is worth about 1.9 trillion baht overall as it also includes 900 billion baht of steps by the Bank of Thailand, Finance Minister Uttama Savanayana said in a briefing in Bangkok.
The economy is on course for its deepest contraction since the 1990s because of a slump in tourism, exports and confidence, increasing pressure on Prime Minister Prayut Chan-o-cha’s government to scale up spending.
“Covid-19 is now our national agenda,” Gen Prayut said in a briefing. “I’ll be stringent about how we spend, and that the spending is done most effectively.”
Implementation of the revised borrowing plan is due from May and will take place in several rounds by September 2021, the administration said, adding that 80 billion baht to 100 billion baht of existing budget funds will be reallocated to tackle the fallout of Covid-19.
Baht Debt
The new debt will largely be baht-denominated, although other currencies are possible, the finance minister said.
The administration announced the details of the latest stimulus program on April 3. On Tuesday, it said the initiative is worth about 9% of GDP, adding that a heavily oversubscribed cash-handout program is being extended by three months.
The public debt-to-GDP ratio is expected to reach 57% in 2021, below the limit of 60% under fiscal rules, Mr Uttama said. The central bank has predicted a 5.3% economic contraction this year, but
The Bank of Thailand steps are:
- Cheap funds for banks so they can extend 500 billion baht of loans at a 2% interest rate to small and medium-sized firms
- A six-month debt moratorium on principal and interest for such businesses, for loans not exceeding 100 million baht
- Setting up a 400 billion baht corporate bond liquidity stabilization fund to backstop the bond sector
- Cutting the contributions that commercial banks make to a financial bailout fund to 0.23% of deposits from 0.46%
Bank of Thailand Governor Veerathai Santiprabhob said the central bank is ready to do more as necessary to cushion the economy, including assistance for the secondary market for corporate bonds.
Stocks Rally
The central bank has cut interest rates to a record low of 0.75% this year and injected liquidity to stabilize financial markets. The government has already rolled out economic packages designed to deliver a boost of more than 500 billion baht to mitigate the impact of the virus outbreak.
The benchmark SET index rose as much as 7.2% Tuesday, boosted by a global rally sparked by hopes the virus crisis may be easing in some areas. The baht strengthened about 0.4% against the dollar.
“The market has a positive view on the stimulus package,” said Mayuree Chowvikran, deputy managing director at Yuanta Securities (Thailand) Co in Bangkok.
Thailand on Tuesday reported the smallest number of new coronavirus cases in about three weeks, saying restrictions on daily life are inhibiting the disease. Another 38 infections were detected, taking the total to 2,258, the government said.