BoT recommends additional aid measures
Foreign arrivals outlook cut to 3m
Thai economic uncertainty looms large amid a fragile recovery, says the Bank of Thailand, and it advised the government to prepare additional financial and fiscal aid packages to cushion against a worst-case scenario.
The central bank on Wednesday published the edited minutes of the Monetary Policy Committee's meeting on March 24, where it projected the Thai economy would recover slowly and unequally in the short term. Reopening the country to foreign tourism could be delayed because of insufficient vaccine supply, public concerns over the safety of vaccines, and potential virus mutations.
Based on this scenario, the central bank downgraded foreign arrivals to 3 million from 5 million due to the country's stalled reopening plan and international travel restrictions in source markets, particularly China.
The impact of new government stimulus could also be weaker than estimated if there is a delay in the approvals of the remaining projects under the emergency decree. The decree remains in effect until the third quarter of 2021.
Moreover, government consumption in 2022 was significantly downgraded from 1% growth to a 3.1% contraction.
The central bank said in the report targeted and sufficient government measures should be expedited to reduce economic scars, especially for those in the private sector, which is in an increasingly fragile financial position. Elevated household debt and a weakened labour market will likely also hamper economic recovery moving forward.
"Under the worst-case scenario, the government should prepare additional financial and fiscal measures to protect against uncertainties, especially if inbound foreign tourists are lower than expected," it said.
Financial and credit measures should encourage financial institutions to expedite debt restructuring for both retail borrowers and businesses, as well as support the distribution of liquidity in a targeted manner to reduce the debt burden of affected groups, particularly through new rehabilitation measures consisting of soft loans and asset warehousing, said the report.
Global financial markets have become more volatile in line with economic recovery. Long-term US Treasury yields rose rapidly as the market expects the Federal Reserve to withdraw monetary policy accommodation sooner than previously expected, leading to higher long-term government bond yields in most countries, including Thailand.
The baht depreciated against the US dollar, while the nominal effective exchange rate decreased from the previous meeting.