Thailand Throws $11 Billion Lifeline to Pandemic-Hit Firms

Thailand unveiled a raft of measures to help small and medium businesses and the tourism industry to weather a liquidity crunch, as a delay in full reopening to foreign visitors dims the prospects for economic recovery.

The cabinet approved a 250 billion baht ($8.1 billion) soft loan program that will allow small and medium enterprises to access credit at below-market rate, while also clearing a 100 billion baht plan that allows cash-starved companies to park their assets with lenders in exchange for credit, officials said Tuesday at a briefing in Bangkok.

The government will extend credit for the so-called asset warehousing program which will allow businesses such as hotel operators from having to liquidate distressed assets at firesale prices or go out of business because of their debts. The program may be operational by May, Bank of Thailand Governor Sethaput Suthiwartnarueput said.

Thailand Throws $11 Billion Lifeline to Pandemic-Hit Firms

The steps to channel more credit to business come a day ahead of a central bank rate decision, with the Bank of Thailand expected to hold its benchmark rate at a record low of 0.5% for a seventh straight meeting. The central bank sees tourism, which accounted for about one-fifth of gross domestic product pre-pandemic, as key to returning Southeast Asia’s second-largest economy to growth after it shrank by 6.1% last year.

Uneven Recovery

The recovery will be uneven and some sectors of the economy are unlikely to employ the same number of people even with the return of growth to pre-Covid levels, Sethaput said. The existing relief measures were seen as inadequate to aid a full recovery, spurring authorities to issue additional stimulus to “close the existing gaps” for SMEs and some other sectors, he said.

“We’re coming toward the final stretch of Covid-19. These measures could create opportunities to as many as 60,000 businesses and support 800,000 jobs,” Deputy Prime Minister Supattanapong Punmeechaow said.

Highlights of asset warehousing program:
  • Bank of Thailand to provide loans at 0.01% interest to financial institutions to operate the plan
  • Debtors can transfer properties to settle unpaid debt with properties or other assets
  • Debtors have the first right to lease back those properties for operations and buy back
  • Debtors can buy back assets within five years at a price not exceeding the transfer price plus 1% carrying cost. Banks can charge expenses to take care of assets
  • Government to waive taxes related to asset warehousing transactions

The program comes as the Bank of Thailand has struggled to channel assistance to small and medium enterprises during the pandemic. Only about 130 billion baht out of 500 billion baht the central bank earmarked to help SMEs since last year has actually been delivered, as commercial banks are hesitant to lend with the central bank capping interest charges at 2% and SMEs showing a high risk of default.

The government will provide guarantee of as many as 10 years under the new soft-loan program with the average interest rate set at 5% annually for a five-year loan. The rate will not exceed 2% in the first two years with the government compensating interest in the first six months, officials said.

While the measures to ease liquidity showed the central bank is focused on reviving the economy in the medium term as well, it needs to assess the impact of these steps on an ongoing basis, said Tim Leelahaphan, an economist at Standard Chartered Bank Plc in Bangkok.

“If not, they should fix them in a timely manner by getting feedback from banks and monitoring the impact on businesses,” Tim said. “The bank may issue additional measures if there are businesses that are still not covered by the existing measures.”

Prime Minister Prayuth Chan-Ocha’s cabinet also approved the extension of a program that subsidizes air travel and hotel expenses to boost domestic tourism. The participants can avail the benefits until the end of August, said Danucha Pichayanan, National Economic and Social Development Council secretary-general. It also cleared a plan to to boost sales of tours operators, with both the programs set to cost 10.7 billion baht, he said.

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