Govt plans more stimulus packages to prop up economy
More stimulus packages are in the pipeline to counter the impact of the Covid-19 outbreak, a senior official said, while an economist has urged the government to expand the fiscal deficit to up to Bt 600 billion.
Kobsak Pootrakool, secretary to the Council of Economic Ministers, said that economic ministers would consider extra packages as relief for certain sectors hit hard by the coronavirus pandemic after the government had recently implemented a stimulus package.
Federal Reserve slashes interest rates to zero as part of wide-ranging emergency intervention
He said that the spread of the coronavirus is expected to end by the end of June and after that it would be a recovery phase for the economy. The government had implemented 14 measures on March 6 to counter the virus impact, but they may not be adequate, according to Korbsak who is also deputy secretary-general to the Prime Minister for Political Affairs.
He said currently half of the foreign tourists visiting Thailand las year still visited this year, but they are all expected to leave soon, resulting in an even larger impact on the already reeling tourism industry. The number of tourists last year touched 39.7 million, up 4.2 per cent year on year, while total revenue was Bt1.93 trillion, up 3 per cent over 2018.
If things go as forecast, the Thai economy will return to normal in the fourth quarter of this year, he said.
However, the government has to closely monitor the situation as Europe has become the epicentre of the pandemic and the United States has declared a national emergency in its efforts to deal with the infections. “The virus outbreak could stay with us for the whole year, then we have to think about how we could do more to shore up the economy,” he warned.
Phatra Securities has cut its gross domestic product forecast from 1.4 per cent to a contraction of 0.4 per cent due to the impact of the coronavirus outbreak.
The tourism industry, which accounts for 12 per cent of GDP, will be hard hit as the number of tourists will drop by 50 per cent in the first half of the year, said Phatra. Then it will slowly recover in the third and fourth quarters and lower oil prices will have little positive impact on growth. For the full year, the number of visitors are expected to drop by 25 per cent over 2019, said Phatra.
The US Federal Reserve is expected to cut its benchmark interest rate to zero at its meeting on March 25. The Fed's move would press the Bank of Thailand to lower by 25 basis points the key policy rate to 0.75 per cent, which will be a historic low, added Phatra.
Meanwhile, Anusorn Tamajai, director of the Economic and Business Research Centre at Rangsit University, said that the BOT may need to introduce quantitative easing, or bond purchases in the next few months, as the central bank may need to inject large liquidity into the market to support businesses as the Fed, Bank of Japan and European Central Bank have been doing. The Thai central bank may also need to drastically cut policy rate, he suggested.
The Finance Ministry should consider increasing the fiscal deficit from Bt450 billion to Bt600 billion for the current fiscal year in order to have more funding to fight the coronavirus and shore up the economy. More stimulus package should prevent the economic growth rate from going below 1 per cent, he said.
If the government can maintain economic growth at around 1 per cent this year, public debt would stay at below 50 per cent of GDP. However, if economic conditions deteriorate further, debt-to-GDP could shoot up to 70-80 per cent of GDP in next five to seven years, he warned. As of January 31, public debt-to-GDP was 41.3 per cent, totalling Bt 6.98 trillion, versus Thailand’s GDP value of Bt 16.9 trillion. The government targets public debt at below 60 per cent of GDP given its fiscal prudence benchmark.