Kingdom has enough resources to beat crisis: Thai Bankers Association
The Thai Bankers' Association (TBA) estimates the Covid-19 crisis may cost the Thai economy more than Bt1.3 trillion, but says government measures will mitigate the recession.
The association believes that the government's measures are timely, comprehensive and effective in cushioning the impact of the contagion crisis.
It adds that priority should be given to public health, jobs and living conditions, as well as to economic and financial market stability. It forecasts a GDP cut of 7.7 percent if the situation returns to normal quickly, but more than that if the crisis is prolonged.
TBA chairman Predee Daochai noted that additional measures launched by the Bank of Thailand (BOT), Finance Ministry and financial institutions on April 7 to assist small and medium-sized enterprises (SMEs) and stabilise the corporate bond market prompted emergency decrees for BOT issuance of soft loans for liquidity, to stabilise the financial sector, and loans for economic relief and rehabilitation.
These Phase 3 relief measures will cost Bt1.9 trillion but are deemed "essential".
The TBA warned that the tourism sector may bear the brunt of the estimated Bt1.3 trillion Covid-19 impact. Thai tourism could see Bt1.1 trillion wiped off its revenue, which may in turn cause the Thai economy to plunge to 1997 levels or even deeper if the contagion cannot be brought under control within the second quarter of this year. In this case, the economic loss may be worse than what was seen during the Tom Yum Kung crisis in 1997.
However, the important difference between the Covid-19 outbreak and the 1997 crisis is that the Thai government has launched “rapid” and “large-scale” measures to prevent the virus situation from worsening.
Public health management has been prioritised to contain the spread of infection and treat mounting cases, while people were being assisted with jobs and living conditions, all of which required fiscal intervention.
Hence, an emergency decree was issued to enable the government to tap an additional Bt1 trillion from various government agencies’ funds.
Also imperative is ensuring stability within the financial market, the TBA says, because the Thai financial market is more closely linked with overseas markets than in 1997.
If the Thai financial market was left in tatters, jitters at home and abroad would have substantially dented interest rates and yields in financial markets, thus undermining stability of the financial system as well as businesses and households.
The central bank's relief measures worth Bt900 billion are targeted towards establishing the Corporate Bond Stabilisation Fund (BSF) for a corporate bond market worth about 22 percent of GDP. The BSF would help enterprises in need of funds to pay off current debt and bolster business liquidity, says the TBA.
The BSF is intended to assist both institutional and retail investors. Small depositors have increasingly put their savings in debt instruments.
In addition, the assistance this time around comprises measures to aid the business sector, in particular SMEs – which make up over 99 percent of all businesses in the country, and employ more than 85 percent of the total workforce, or 13 million people – via soft loans and an immediate suspension of principal and interest payments.
"We hope that such relief measures will not only offer a new lease of life for businesses, but also sustain employment and mechanisms of some supply chains while everyone is staying at home to combat Covid-19 for the country," said Predee.
"I have confidence that numerous actions, related both to financial and fiscal aspects of the government, will help Thailand avoid a steeper economic contraction and grave financial crisis. Although the situation will eventually hinge on when the Covid-19 pandemic ends, I strongly believe that the Thai government still has abundant and sufficient resources to help the economy weather this crisis.”