By ERICH PARPART
ECONOMIC GROWTH is expected to improve in the current quarter as a result of government stimulus packages introduced in the past two months, while the latest round of short-term stimulus to boost the property sector will generate more economic activities
Meanwhile, the Thai Industries Sentiment Index (TISI) increased for the first time in nine months in September, while industrial confidence in relation to the next three months is at its highest level in 10 months.
“If the measures that were introduced are successfully implemented, then it should definitely help with economic expansion in the final quarter of the year, while the economy will definitely recover in 2016 from the ongoing economic stimulus measures, progress in the government’s mega-infrastructure projects, and the expected increase in agricultural prices,” said FTI chairman Supant Mongkolsuthree.
The Joint Standing Committee on Commerce, Industry and Banking, of which the FTI is a member, has been expecting 2015 gross domestic product to expand by 2.5-3 per cent since its last prediction in July, but Supant commented last week that growth should now be closer to 3 per cent because of the government’s stimulus measures. The Council of Economic Ministers, led by Somkid Jatusripitak, has so far introduced measures to help low-income earners via an increase in the Village Fund’s budget and other job-creation measures worth around Bt139 billion in the first phase of its economic stimulus efforts.
The second phase comprises measures worth Bt206 billion to support small and medium-sized enterprises in terms of low-interest policy loans and higher loan guarantees, other tax breaks for start-ups and government venture capital.
The latest round of measures to stimulate domestic businesses and help low-income earners to own a home via the provision of state-bank loans, a tax reduction and the lowering of transfer and mortgage fees to 0.01 per cent is worth around Bt10 billion, with an expected cost of Bt15 billion in terms of lost government income from fees and tax collection.
This means that the sum of the various stimulus budget measures that have been introduced since August, when the current Council of Economic Ministers was appointed, stands at around Bt355 billion. This is before a third round of stimulus measures aimed at attracting foreign investment, which will be implemented in January, according to Somkid’s timeline.
“The measure to permanently set corporate income tax at 20 per cent will clear the uncertainty that has surrounded the issue, the 10-year tax exemption for venture capital should make start-ups stronger because it usually took them around three to four years to generate enough profit to contribute, while the short-term real-estate measures will help low-income earners to get and repay a mortgage,” said Supant.
“Low-income earners who have been waiting a good while to buy a house will buy now, because transfer and mortgage fees are important for them, while income-tax reduction for the next five years for new home-owners will make them decide [to buy] even faster as they can save money, as well,” he explained. “The Bt10-billion budget for the Government Housing Bank to provide more housing loans should also provide home seekers with more access to finance, and all these measures together should be capable of making the real-estate sector stronger in the short term,” he added.
The FTI chairman said the government’s effort to stimulate the property sector was “the right decision” because the sector involved many businesses, including construction, design and services, and the short-term measures would generate more income in the short run.
However, more measures to further support the sector in the long term, such as improvement in infrastructure, logistics, zoning and the digital economy, should also be introduced, and we will wait and see what the government does next, he said.
The TISI increased slightly from 82.4 basis points in August to 82.8 points in September – the index’s score is based out of 200 points, where less than 100 indicates weak confidence – while industrial confidence in the next three months also rose, from 102 points to 102.6.
The majority of industries contributing to the index pointed out that the government’s measures to help low-income earners, the acceleration of existing and new, small government projects and the support for SMEs should be able to boost orders and sales in the current quarter.