Adjustments to the economic outlook in the wake of floods

At present, only 550 million cubic metres of floodwater can be released into the Gulf of Thailand per day, so Paknam Po in Nakhon Sawan province, Ayutthaya, Prathum Thani and Nonthaburi, as well as other provinces, will suffer for the extended period.
Afterwards, the government says it will take urgent rehabilitation measures to help residents of these affected areas.
Regarding Bangkok, the inner city may not be flooded, but the outlying areas will be affected.
According to deputy premier Pracha Promnok, Nakhon Sawan currently has the largest amount of floodwater, totalling 8 billion cubic metres, followed by Ayutthaya, Pathum Thani and Nonthaburi provinces, totalling 6 billion cubic metres. In addition, there are another 2 billion cubic metres of floodwater around the banks of the Chao Phraya River.
In the coming days, the situation is expected to improve, as major dams have slowed the release of water into downstream provinces.
In terms of the economic impact, the Bank of Thailand has estimated damages to the tune of Bt120 billion, with three major industrial estates in Ayutthaya province accounting for Bt100 billion.
Automobile, electronic, chemical and other factories have been left under water after protective walls could no longer withstand the floodwater.
Several hundred factories have been shut down, while up to 200,000 workers are temporarily out of work.
Regarding the agricultural sector, the damages are estimated to be about Bt20 billion, as rice fields and other crops have been inundated.
Earlier, the central bank suggested that the massive flooding could wipe off 0.6 per cent of this year’s GDP, but the actual impact will depend on the rehabilitation process.
According to the central bank, Thailand’s GDP growth is 4.1 per cent this year, and is projected at 4.2 per cent for 2012. It will announce a new official forecast later this month.
This year’s floods are the worst in at least five decades. The Finance Ministry’s figures show that economic losses could range from 0.6 per cent to 0.9 per cent of GDP.
The Fiscal Policy Office has already cut its GDP growth forecast for 2011 to 3.7 per cent from 4.5 per cent, while tax collection for fiscal year 2012 is likely to fall by Bt12 billion due to the affects of the massive flooding.
Given the magnitude of the economic impacts, the government is expected to come up with tax concessions, low-interest loans and other measures to help affected businesses, especially small and medium-sized enterprises.
According to the Finance Ministry, one tax incentive could be a faster amortisation period for businesses which invest in boosting their productivity.
Secondly, SMEs whose annual sales rvenues are less than Bt30 million will be exempt from income taxes on the first Bt150,000 net profit.
The 15-per-cent tax rate will be applicable for the next Bt150,000 profits up to Bt1 million, while the 23-per-cent tax rate will be applicable on profits exceeding Bt1 million.
The top corporate income tax rate will also be cut to 20 per cent in 2013.
For large businesses, the corporate income tax rate has also been reduced to 23 per cent from 30 per cent, effective in 2012.