Thailand Economic Focus: Financial stimulus packages to combat COVID-19 and achieve SDGs
- Since the pickup in severity of the virus pandemic, the Bank of Thailand has implemented three rate cuts of 25 basis points in 2020 to provide some support to economic activity.
COVID-19 is an unprecedented global health crisis, which is having major economic and social impacts in Thailand. Since the pickup in severity of the virus pandemic, the Bank of Thailand has implemented three rate cuts of 25 basis points in 2020 to provide some support to economic activity. Currently, the policy rate stands at a record low of 0.5%. The Ministry of Finance has also responded quickly to the virus outbreak by announcing three fiscal stimulus packages worth THB2.4 trillion (US$76.2 billion) or 15.0% of GDP (as of the end of April 2020) consisting of various measures for both households and businesses to tackle the negative impact brought about by COVID-19.
Such measures are targeted at those most at risk of losing their jobs or business in recognition of the fact that two thirds of the of the labor force work is in the informal sector. These include:
- Households (35.4% of the packages): cash handouts for informal workers, personal loan, a reduction and postponement of employee contributions in the Social Security System, delay and reduction of utility bills, tax exemption on risk payments for medical workers and health insurance premiums deduction
- Soft loans to Small and Medium Enterprises (SMEs, 21.2% of the packages)
- Building community infrastructure and creating jobs (16.5% of the packages)
- Corporate bond liquidity stabilization fund under which the central bank will buy corporate bonds to ensure that firms remain liquid (16.5% of the packages)
- Businesses (10.4% of the packages): tax relief, various debt relief, exemption of import duties for products related to the prevention and treatment of COVID-19, exemption of taxes and fee cuts for debt restructuring with non-financial institution creditors, a reduction and postponement of employer contributions in the Social Security Fund and delay and reduction of service fees and rents for firms
The breakdown of fiscal stimulus packages exhibits Thailand’s clear focus on helping vulnerable people, while maintaining the health of the Thai economy through supporting businesses and creating jobs. The fiscal stimulus will help counter overall unemployment to an extent through its focus on supporting SMEs, especially in tourism and its related businesses such as hospitality, trade, and transport (Goals 1 and 8). Social protection measures including unemployment benefits and cash handouts for informal workers are designed to help vulnerable people cope with adversity and secure lives, livelihoods, and the economy (Goals 1, 3 and 10). Allocating THB500 billion of soft loans to SMEs and THB400 billion for infrastructure investment will support a pathway to an inclusive and sustainable recovery that protects jobs and supports SMEs (Goals 8 and 9). These are largely in line with the people and prosperity aspects of the 2030 Agenda for Sustainable Development.
One aspect that Thailand should consider including within the future policy is the planet. The performance and resilience of the Thai economy depend on the health of the natural environment and ecosystems. To build back better together, Thailand should not return to business-as-usual practices that put pressure on wildlife and biodiversity. Thailand should harness low-carbon investment opportunities to reboot the economy while reducing the greenhouse gas emissions and air pollution which jeopardize lives. It means pulling people out of poverty, creating more jobs, and reducing economic disparities. It will also help reduce the probability of future pandemics and broader environmental and climate change risks.
The views expressed within this publication are solely those of the author and do not necessarily carry the endorsement of the United Nations. Views expressed reflect the author’s judgment as at the date of this publication and are subject to change.