Thai governor calls for bigger fiscal boost

“More needs to be done”, Santiprabhob says, as Thai economy faces major contraction

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Bank of Thailand governor Veerathai Santiprabhob
Photo: yarexphotography.com

The Thai government should use fiscal policy more to help the economy cope with the coronavirus pandemic, the Bank of Thailand’s governor said on August 21.

“In such critical condition, the one who is capable of stimulating the economy is the government… and more needs to be done” Veerathai Santiprabhob told journalists, Reuters reports. Thailand’s government has so far implemented a 1.9 trillion baht ($60.37 billion) fiscal package in response to the pandemic.

Santiprabhob is due to step down as BoT governor after his term ends in September. The government chose Sethaput Suthiwart-Narueput, a member of the BoT’s seven-seat monetary policy committee, to succeed Santiprabhob in September. The former World Bank economist also serves as an economic adviser to Thai prime minister Prayuth Chan-Ocha.

The Thai central bank has left its policy interest rate unchanged at a record low of 0.5% since May, the lowest in Asia’s emerging markets. The BoT has cut the rate 75 basis points in three cuts this year. The Bank of Thailand also announced a new programme to help businesses restructure their debts.

Data on reported Covid-19 cases show that Thailand has contained the virus’s spread, but the pandemic has led to a major economic slowdown. The Thai economy is expected to fall 8.1% in 2020, according to the BoT’s forecast. Thailand’s GDP shrank 12.2% year-on-year in the second quarter of 2020, its worst contraction since the 1998 Asian crisis.

The BoT launched a programme on Friday to help expedite debt restructuring and lessen businesses’ debt burdens. The scheme, called “Dr Biz”, will set up a mechanism for multi-creditors businesses and assign a lead creditor to co-ordinate with other creditors.

The programme will extend repayment periods, lower instalment payments and adjust repayment plans. It will offer additional financing to borrowers with prospective good profits, solid business plans and a commitment to continuing their businesses, the central bank said.

The first phase of the debt restructuring plan will start in September, targeting debtors with total credit lines in the range of 50–500 million baht. The scheme could subsequently be extended to other groups of debtors, the BoT said.

The first phase will help around 8,400 targeted companies with a combined debt of about 1.2 trillion baht, Santiprabhob said.

Santiprabhob is a former IMF economist who held key roles in the country’s finance ministry during the Asian financial crisis. The 50-year-old central banker was appointed as the twentieth governor of the BoT in 2015.

“The BoT has all the more reasons to ease but no room left to do so,” Prakash Sakpal, an economist with ING, tells Central Banking. “Even if economic activity bottomed in the last quarter, the recovery is not going to take hold as long as two key drivers of exports and tourism remain missing in action.” The central bank is not likely to resort to quantitative easing this year, Sakpal says.

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