Cars pass a Skytrain (Bangkok Mass Transit System) construction site in Bangkok, Thailand - Reuters
BANGKOK (Reuters): Thailand is planning a stimulus package worth $ 10 billion that will include support for farmers and tourism, its finance minister said on Friday, in a move to shore up a flagging economy.
Southeast Asia’s second-largest economy expanded 2.8% in the first quarter, the weakest annual pace in more than four years, as exports – a key growth driver – have declined amid rising trade tensions and a strong baht THB=TH.
The Government is targeting gross domestic product (GDP) growth of at least 3% this year and 3.5% next year, Kobsak Pootrakool, secretary of the economic cabinet, told reporters after the meeting to discuss the stimulus measures.
Following discussions between economic and finance officials, the package was worth 316 billion baht ($ 10.23 billion), Finance Minister Uttama Savanayana told reporters.
The stimulus package will help “cope with a global slowdown and enable the Thai economy to grow as targeted”, Uttama said. Earlier in the day, in a post on Facebook, the minister had announced a package of at least 225 billion baht, but that post was removed.
The package – which will be presented to the Cabinet tomorrow – includes loans and a debt moratorium for farmers, loans for smaller businesses, and more money for low-income earners.
However, the package does not include subsidies for farm prices, as initially announced. Uttama had said the Government would guarantee rice prices at 10,000-15,000 baht per ton, cassava and rubber prices at 60 baht per kg, and oil palm prices at 4 baht per kg.
Farm price guarantees will need to be considered by relevant committees first, Uttama said.
The Government will provide cash hand outs of 10 billion baht for 10 million people plus tax breaks on domestic tourism spending. Uttama had initially announced cash hand outs of 15 billion baht.
Kobsak said the Government will offer visa exemptions for visitors from China and India as it aims for 39.8 million foreign tourists this year and 41.8 million next year. Foreign tourist receipts account for 12% of Thailand’s GDP.
The measures should generate cash flow of at least 200 billion baht in the economy in the second half of the year, Uttama said.
Nomura economist Chanon Boonnuch in Singapore said the stimulus would help offset some of the downside risks to growth posed by a worsening drought and the knock-on effects of the Sino-US trade war.
Second quarter GDP data, due to be released today, is expected to economic growth slowing to 2.4%.
Last week, the Central Bank said 2019 growth might be less than its forecast of 3.3%, after last year’s 4.1% expansion.