Thailand Open to More Stimulus If GDP Growth Misses Target

Thailand’s government is ready to take more fiscal steps if economic growth falls below its base-case forecast, driven by the latest Covid-19 outbreak or delays in vaccinating the public, a senior Finance Ministry official said.

“The government is ready to do more if needed, and we still have fiscal space left,” Kulaya Tantitemit, acting director general of the Fiscal Policy Office, said Thursday in an interview in Bangkok. Still, she believes the ministry’s economic growth forecast for this year, which was revised down to 2.8% last week, is conservative enough.

“Things are still in line with our forecast,” she said, adding that high-frequency indicators, including Google Mobility data, are showing activity is recovering faster than expected.

With the nation’s benchmark interest rate already at an all-time low since last May, fiscal policy has taken the lead in supporting an economy whose key drivers such as tourism and exports have been hit hard by the pandemic. The Bank of Thailand held rates steady for a sixth straight meeting Wednesday, saying fiscal measures and policy coordination among government agencies would be critical to support the recovery going forward.

Thailand Open to More Stimulus If GDP Growth Misses Target

Thailand’s Covid caseload has more than tripled since the latest wave of cases began in mid-December. The government unveiled a series of measures last month, including $7 billion in cash handouts, to counter the outbreak. Prime Minister Prayuth Chan-Ocha approved loosening restrictions from this week to allow businesses and schools to reopen.

The ministry currently has no plans for additional fiscal measures after the cash-handout scheme ends in May, anticipating that the outbreak should be under control by then and the economic situation should be better. However, the government still has around 250 billion baht ($8.3 billion) left from its 1-trillion baht borrowing plan, which can be used to support the economy if necessary, Kulaya said.

The government may implement a 40 billion baht cash handout program in March to help nine million employees under the social security system whose incomes have been hit by the Covid-19 outbreak, Labour Minister Suchart Chomklin said on Feb. 3.

READ: Thai Debt Chief Says Planned Borrowing, Funds Cover Fiscal Needs

Kulaya, who used to lead the ministry’s macroeconomic policy bureau, recently returned from a two-year stint as the World Bank’s executive director for Southeast Asia.

Other key points from the interview:

  • Baht strength will likely continue this year on capital inflows to emerging markets and a weak U.S. dollar. However, this will have a limited impact on Thai exports because of an improving global economy
  • The Bank of Thailand will likely keep its benchmark interest rate at 0.5%, an all-time low, all year as the economy still needs accommodative fiscal and monetary policies
  • The ministry expects 5 million tourist arrivals this year, most of them in the final quarter of the year if the government waives a quarantine requirement for vaccinated tourists beginning in October for high season
  • The ministry expects that half of Thailand’s population will be vaccinated by the end of the year
  • 2021 GDP growth may reach 3% if global vaccination moves faster than forecast, boosting Thai exports and tourism
  • The ministry plans to update its database of 14 million welfare-card holders later this year, making policy implementation more efficient

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