Thailand seeks to boost weakening economy with $10.2-billion stimulus package
Thailand is planning a stimulus package worth 316 billion baht ($10.2 billion) to support farmers, lower-income earners, tourism and ultimately the entire Thai economy, the country’s finance minister Uttama Savanayana said on August 16.
The move comes after the nation’s GDP growth plummeted from 3.7 per cent in the last quarter of 2018 to 2.8 per cent in the first quarter of this year, while raw economic data from April to June indicates even a weaker second quarter, particularly in the areas of exports and tourism.
Experts have named a number of problems the Thai economy is facing. One is the weakening global economy amid the trade tensions between the US and China.
However, another issue not to be underestimated is Thailand’s self-inflicted troubled domestic economy with high household debt and decreasing consumption, paired with a loss in productivity – the result of a lack of investments to upgrade factories – and an overvalued currency, a toxic combination which led to a significant drop in exports.
Adding to this, the current government has failed to address those problems effectively during the past five years of military rule, lacking concepts for economic stimulus and discipline in allocation of public funds, with significant parts of them used for military spending and other ineffective public expenses.
Thirdly, foreign direct investment has dropped painfully as a result of continued delays of elections and the confusing formation of a government after the eventual vote in March this year. With no clear direction and Thailand not joining the Trans-Pacific Partnership, foreign direct investment, particularly from Japan, was hit badly. For example, many Japanese manufacturers decided to drop Thailand from their global supply chain.
The strong currency only makes a bad situation worse and the Bank of Thailand was hesitant too long to intervene after it eventually cut rates in early August for the first time in more than four years, much too late, many economists noted.
The drop in tourism arrival numbers is also a huge problem. The sector last year (officially) made up a whopping 18 per cent of GDP, and factoring in the shadow economy it is essentially more. Having relied too long on a continuing growth of foreign visitor numbers, a drop in arrival is now hitting the country unprepared and hard. The strong currency and bureaucratic hurdles for long-stay visas also prompted expats and retirees to relocate in numbers elsewhere in the region.
Solutions to the problems are aggravated by persistent corruption, excessive income equality, a lack of tax paying discipline and financial literacy of indebted households which limits the improvement of their debt situation.
The government will now direct the stimulus package towards farmer, the tourism sector and low-income earners. The package for farmers includes subsidies, soft loans and product price guarantees, whereby the government will allocate 210 billion baht ($6.8 billion) for these measures.
Secondly, the government plans to provide a series of allowances for cost-of-living, commuting expenses, cooking gas subsidies and job training expenses for low-income earners, depending on their yearly income or whether they hold a welfare card. It will also implement measures to improve accessibility for small and midsize enterprises to funding for cash flow and machinery investment.
The government also aims to distribute 1,500 baht each to ten million citizens meant as a handout for domestic travel to boost the tourism sector. A special focus will be placed on promoting tourism in big cities and second-tier provinces
As for the funding of the package, about 200 billion baht ($6.5 billion) of the package would be loans from state banks, while some 100 billion baht ($3.2 billion) would come from the annual budget, roughly evenly split between fresh stimulus spending and already allocated funds.
The government said the package should support a return to at least three per cent economic growth in 2019, and 3.5 per cent next year, after GDP growth rose just 2.3 per cent in April through June, the weakest pace in almost five years.
Thailand is planning a stimulus package worth 316 billion baht ($10.2 billion) to support farmers, lower-income earners, tourism and ultimately the entire Thai economy, the country’s finance minister Uttama Savanayana said on August 16. The move comes after the nation’s GDP growth plummeted from 3.7 per cent in the last quarter of 2018 to 2.8 per cent in the first quarter of this year, while raw economic data from April to June indicates even a weaker second quarter, particularly in the areas of exports and tourism. Experts have named a number of problems the Thai economy is facing. One is...
Thailand is planning a stimulus package worth 316 billion baht ($10.2 billion) to support farmers, lower-income earners, tourism and ultimately the entire Thai economy, the country’s finance minister Uttama Savanayana said on August 16.
The move comes after the nation’s GDP growth plummeted from 3.7 per cent in the last quarter of 2018 to 2.8 per cent in the first quarter of this year, while raw economic data from April to June indicates even a weaker second quarter, particularly in the areas of exports and tourism.
Experts have named a number of problems the Thai economy is facing. One is the weakening global economy amid the trade tensions between the US and China.
However, another issue not to be underestimated is Thailand’s self-inflicted troubled domestic economy with high household debt and decreasing consumption, paired with a loss in productivity – the result of a lack of investments to upgrade factories – and an overvalued currency, a toxic combination which led to a significant drop in exports.
Adding to this, the current government has failed to address those problems effectively during the past five years of military rule, lacking concepts for economic stimulus and discipline in allocation of public funds, with significant parts of them used for military spending and other ineffective public expenses.
Thirdly, foreign direct investment has dropped painfully as a result of continued delays of elections and the confusing formation of a government after the eventual vote in March this year. With no clear direction and Thailand not joining the Trans-Pacific Partnership, foreign direct investment, particularly from Japan, was hit badly. For example, many Japanese manufacturers decided to drop Thailand from their global supply chain.
The strong currency only makes a bad situation worse and the Bank of Thailand was hesitant too long to intervene after it eventually cut rates in early August for the first time in more than four years, much too late, many economists noted.
The drop in tourism arrival numbers is also a huge problem. The sector last year (officially) made up a whopping 18 per cent of GDP, and factoring in the shadow economy it is essentially more. Having relied too long on a continuing growth of foreign visitor numbers, a drop in arrival is now hitting the country unprepared and hard. The strong currency and bureaucratic hurdles for long-stay visas also prompted expats and retirees to relocate in numbers elsewhere in the region.
Solutions to the problems are aggravated by persistent corruption, excessive income equality, a lack of tax paying discipline and financial literacy of indebted households which limits the improvement of their debt situation.
The government will now direct the stimulus package towards farmer, the tourism sector and low-income earners. The package for farmers includes subsidies, soft loans and product price guarantees, whereby the government will allocate 210 billion baht ($6.8 billion) for these measures.
Secondly, the government plans to provide a series of allowances for cost-of-living, commuting expenses, cooking gas subsidies and job training expenses for low-income earners, depending on their yearly income or whether they hold a welfare card. It will also implement measures to improve accessibility for small and midsize enterprises to funding for cash flow and machinery investment.
The government also aims to distribute 1,500 baht each to ten million citizens meant as a handout for domestic travel to boost the tourism sector. A special focus will be placed on promoting tourism in big cities and second-tier provinces
As for the funding of the package, about 200 billion baht ($6.5 billion) of the package would be loans from state banks, while some 100 billion baht ($3.2 billion) would come from the annual budget, roughly evenly split between fresh stimulus spending and already allocated funds.
The government said the package should support a return to at least three per cent economic growth in 2019, and 3.5 per cent next year, after GDP growth rose just 2.3 per cent in April through June, the weakest pace in almost five years.
