The economic cabinet proposed a third economic relief package on Friday as the economy goes into recession.
The Bank of Thailand (BOT) expects a recession of at least 5.3 per cent this year.
The government had earlier injected 517 billion baht into the economy via two economic relief packages in March. The new package is now awaiting cabinet approval next Tuesday.
Deputy Prime Minister Somkid Jatusripitak said the new package will cover three main groups of measures. The first group involves plans to support individuals and businesses that have not been targeted by the previous packages.
The second group aims at increasing economic activity in order to support the economy in the next 3-4 months. The third group will cover measures to support the financial sector.
Deputy Somkid said the money to fund the third package will take 10 per cent of the government’s investment budget that was set for the 2020 fiscal year. The budget was initially approved at 3.2 trillion baht; of which, 74.7 per cent or 2.39 trillion baht was set aside for regular costs, such as the wages for civil servants.
The remaining budget, which was originally set for investments and is worth 810 billion baht, will be the source of the third economic relief package. If they can get 10 per cent of the 810 billion baht, at least 81 billion baht could be made available for the package.
If the source of funding from the government fiscal budget is lower than they thought, the government will consider an emergency decree for a loan bill that could be worth 100-200 billion baht.
On Tuesday, the opposition proposed that a 200 billion baht bill is “feasible” but Somkid did not confirm how much the loan bill could be or where the loan would come from. Finance Minister Uttama Savanayana denied on Thursday that the source of the loan could be coming from the International Monetary Fund (IMF).
Another source of funding could be from the BOT’s coffer.
“The more we can get from the budget, the less the loan amount will be,” Somkid summed up.
According to the central bank’s governor, Veerathai Santiprabhob, the BOT has proposed in principle a direct soft loan policy and measures to support the private bond market via two emergency decrees as part of the third package. A similar initiative had been executed following the major flooding during 2011-2012.
“This soft loan project will be larger than the one that has been introduced by the Government Savings Bank,” Veerathai said.
As part of the first economic relief package, the government introduced a soft loan policy worth 150 billion baht, which the Government Savings Bank (GSB) is now lending out to commercial banks at 0.01 per cent interest rate. Commercial banks can then grant loans at 2 per cent to SMEs. Each borrower can take out a loan of no more than 20 million baht.
The BOT is also proposing another measure to support the private bond market, which is worth 3.5 trillion baht. In comparison, the amount of loans commercial banks are giving out to the sector private is worth 14 trillion baht.
This will involve a second emergency decree to allow the BOT to buy private bonds that are reaching maturity but cannot be a rollover because of the lack of liquidity. The BOT will consider the bond on a case-by-case basis and will only pick bonds from companies “with good quality.” For example, they must have gathered funds from the private market at no less than 50 per cent of the bond value.
