Govt relief package falls far short, say economists
The government's economic relief package earmarked for people reeling from the fallout of the Covid-19 pandemic would not be sufficient, considering the vast extent of the economic damages, say economists and a businessman.
“Judging from the figure of 3 million people to receive handouts of Bt5,000 per month each for the next three months, it is far lower than the number of people left unemployed, thus the majority of them will not be getting any financial aid, Nipon Poapongsakorn, distinguished fellow at Thailand Research Development Institute, an independent think-tank, told the Nation.
Nipon estimated that more than 10 million people were affected.
His comment came after Deputy Prime Minister Somkid Jatusripitak announced on Tuesday (March 24) that the government would offer financial aid to those left jobless through closures of the business venues where they worked , following the enforcement of government measures to curb the spread of Covid-19.
Prime Minister General Prayut Chan-o-cha declared a state of emergency to contain the virus on the same day, but not much details were announced.
“Those not coming under the Social Security system will each be given a Bt5,000 cash handout for three months,” said Somkid, adding that “This includes temporary workers, freelancers and self-employed people. The government estimated that up to 3 million people were affected by the preventive measures”.
People registered under the social security scheme will be entitled to 50 per cent of their respective monthly salary for 180 days if their employers closed the businesses, or 90 days in the event of the government ordering the business to suspend operation.
“Furthermore, the government will provide Bt40 billion in loans to affected workers at a maximum of Bt10,000 per person,” added Somkid. “These loans, carrying an interest rate of 0.1 per cent per month, require no collateral”. Government Savings Bank and the Bank for Agriculture and Agricultural Cooperatives will be responsible for extending the lending to about four million people.
If the first batch of loans failed to meet demand, the government will inject another Bt20 billion into the programme, but at a higher loan rate of 0.35 per cent per month.
To further alleviate people’s financial burden, state-owned pawn shops have received a budget of Bt2 billion to provide loans at a low interest rate of 0.125 per cent per month.
Somkid has promised more relief measures if needed.
Nipon, however, criticised the package, saying the government based the spending on the Bt96 billion-emergency fund under fiscal budget 2020.
“It is too small, given the scale of problems, the government may need Bt300 to Bt 500 billion,” said Nipon.
Many countries have launched massive stimulus package, with Germany set to spend as much as $800 billion(Bt26 trillion) to offset impact of the virus on its economy.
He suggested the government issue an emergency decree to borrow adequate funding for solving the economic problems, warning that the economy could become stagnant if nothing is done.
“The government should first secure adequate funding and if the situation improve, part of the loan is not needed to be spent,” he said.
“Financial supports should be universal, covering everyone except personal income tax payers and wealthy individuals. Universal coverage could raise the number of welfare recipients from the 14 million currently receiving monthly grants under the State Welfare Card scheme,” he estimated.
Nipon also questioned how the Finance Ministry could be sure that it is handing out cash to people who were actually impacted by the virus outbreak and business closures .
Employers Confederation of Thai Trade and Industry vice president Tanit Sorat shared similar view, saying each workers should get at least Bt300 per day, equivalent to the minimum wage of Bt9,000 per month.
“However, getting Bt5,000 a month is better than nothing,” he said.
Tanit also expressed doubts about the extension of soft loans to individuals from state-owned banks. It might be similar to the lending facility of Bt150 billion for small and medium-sized enterprises , which has proved difficult for SMEs to access, he added.
Meanwhile, Kobsidthi Silpachai, head of capital markets research at Kasikornbank said the government measures were just a defensive approach to contain economic damages. “Given the small amount of cash handout offered by the government and business disruption, consumers would only spend a small proportion of the money which would hardly have a effect on the economy,” he said.
According an informed source who asked not to be named, the government may need about Bt600 billion to cushion economic impact form the virus outbreak.
Somkid has promised more support measures if the situation does not improve , adding that the next relief package will help farmers during the dry season between between April to July.
The package announced on Tuesday included a rise in personal income tax deduction for health insurance to Bt25,000 per annum from Bt15,000.
The Personal income tax payment date is postponed to the end of August from June while tax return filing is encouraged as taxpayers would get faster tax returns this year than in previous years. State agencies will organise career training and each participant will get a grant of Bt300 a day.
Tax exemption for medical personnel will apply to income generated from work dealing with Covid-19.
Tourism related businesses such as tour agents, spa, transportation , hotels, room rental and restaurants will be eligible to apply for soft loans at the Small and Medium Enterprise Development of Thailand, up to Bt3 million each with 3 per cent interest rate for the first two years of a 5-year term. The SME Bank will provide Bt10 billion for this purpose and borrowers could apply for loans until December 30 this year.
Unlisted firms are also allowed to delay corporate income tax payment until the end of September in some cases.