Thai central bank calls for government to borrow $30bn more
06:09, 19 August 2021
The Bank of Thailand (BOT) is calling for the government to borrow another THB1trn ($30bn) to help reinvigorate the country’s stuttering economy as it views further rate cuts will be ineffective.
The Thai central bank has cut interest rates by 75 basis points last year and resisted another cut earlier this month and instead views government spending and COVID containment as likely more effective in reviving the economy than trimming rates from the all-time low of 0.5%.
Extra borrowings might see debt-to-gross domestic product (GDP) ratio rising to 70% by 2024 – above the country’s legal limit of 60% - but such a move is warranted and needed quickly amid the worse-than-expected impact of the COVID outbreak, state-backed National News Bureau of Thailand reported the BOT as saying.
Strong medicine needed
By amending the legal debt ceiling, Thailand’s economy can recover faster and result in lower debt-to-GDP ratio in the long run, Bangkok Post cited BOT Governor Sethaput Suthiwartnarueput.
“If the government doesn’t quickly provide additional economic support during a time of high uncertainty and to shield against a prolonged crisis,” then public debt would remain elevated with little prospect of getting it down, said Sethaput.
"With such severe symptoms, the medicine must be strong and right to the point," the governor added.
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‘Factory sandbox’ initiative
Sethaput’s comments came after Thailand’s government officially lowered 2021 growth outlook to 0.7%-1.2%, with household spending estimated to grow at slower pace of 1.1%. The BOT itself projected a 0.7% expansion this year following a 6.1% contraction in 2020 – the worst since the Asian financial crisis in the late 1990s.
To lower the economic distress, Thailand this week launched a pilot programme dubbed as ‘factory sandbox’ to help shield its export-oriented manufacturing sector. Export is Thailand’s remaining bright spot amid nearly non-existent tourism and low private consumption.
The initiative – a word play from ‘Phuket sandbox’- is aimed at protecting 3 million jobs and support the THB700bn manufacturing sector, will test, vaccinate and isolate workers infected with COVID to lower the risk of factory shutdowns and supply chain disruptions, Bloomberg reported.
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