Wednesday, August 12, 2020

BOT focuses on pre-emptive moves to mitigate Covid-19 impact on economy

Jul 11. 2020
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By THE NATION

Pre-emptive measures will be launched in three areas to prop the economy up, it was decided at a meeting of the Bank of Thailand (BOT)'s Monetary Policy Committee and the Financial Institutions Policy Committee.

At the year's first biannual meeting on July 7 of the two committees, “The meeting focused on detailed scenario analysis of the Covid-19 crisis and its impact on the Thai economy, as well as the risk of business’ credit rating being downgraded due to the economic recession,” said the report.

“Amidst the current situation with high uncertainty, both committees have agreed on implementation of pre-emptive measures in three aspects as follows:

"First is the evaluation of financial aid measures for household, business and financial market sectors to make sure that deployed measures are effective in increasing liquidity of target groups, as well as ensuring that when the measures end the borrowers can still be able to pay back the loan. These measures also include soft loans provided by financial institutions and Thai Credit Guarantee Corporation to small and medium enterprises.

"As for the liquidity of financial markets, the BOT has been working with the Securities and Exchange Commission to evaluate the risk of mutual funds and bond markets as well as establish the Mutual Fund Liquidity Facility and Corporate Bond Stabilisation Fund to promote confidence among investors and ensure uninterrupted fund-raising process amid the uncertainty of the Covid-19 situation.

"Secondly, provide proactive debt restructuring measures that suit the debt situation of each group, such as businesses that temporarily lack liquidity but will still be able to rehabilitate when the Covid-19 situation improves, and those that require total overhaul in business operations to maintain competitiveness. These measures must also conform to the ability to pay back debts of borrowers in the post-Covid-19 era, which is expected to be significantly lower.

"Thirdly, to continue to provide measures that help strengthen the country’s financial system and promote a careful risk management practice to mitigate the impact of economic contraction and fluctuation in financial markets. Since the start of the Covid-19 crisis, the BOT had suggested that financial institutions including commercial banks, save cooperatives, insurance businesses and mutual fund operators to keep their reserve fund high to be a buffer in case of a financial crisis.

“These measures are important in preventing the crisis from further weakening the Thai economy and help all sectors get back on their feet when the Covid-19 situation resolves,” said the central bank.

“They will also help guide entrepreneurs who need to adjust their administration and business operation to suit the new normal standard in financial economics and the changing financial structure.”

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