Govt readies measures to boost liquidity of Thai economy

After an underwhelming economic expansion in the first half of 2024 due to both internal and external factors, the government is planning to increase the liquidity of the Thai economy during the rest of the year by accelerating disbursement of the government’s budget and providing loans for entrepreneurs, the Finance Ministry said this week.

During an interview with Krungthep Turakij newspaper on Monday, Deputy Finance Minister Paopoom Rojanasakul said that the Thai economy is currently suffering from a chronic problem: Lack of liquidity.

“The main reason behind the sluggish economic expansion is that most of the government's expenditure has yet to enter the economy, due to delays in disbursement of FY2024 budget,” he said. “This has resulted in no new investment and a lack of funds to stimulate the economy.”

He said the fact that the current policy rate is too high for the economic climate did not help the situation. With potential investors all waiting for positive signs, the Thai manufacturing sector is suffering from a halt in the expansion of production and recruitment, he said.

Paopoom pointed out that the high interest rate has also prompted state and commercial banks to tighten their loan criteria for small and medium enterprises (SMEs), which are “the backbone of the economy due to high employment”.

To remedy this, he said, the cabinet has approved an “Ignite Thailand” loan of 5 billion baht, to be distributed by the Government Savings Bank.

The bank is also considering offering another batch of soft loans worth 100 billion baht to SME clients, although this portion will not come from the government's budget, said Paopoom.

Furthermore, the Thai Credit Guarantee Corporation also receive the greenlight with a budget of 50 billion baht to offer loan guarantees to eligible SMEs under the 11th edition of Portfolio Guarantee Scheme (PGS), he added.

“More loan schemes are being considered to increase SMEs’ liquidity,” said Paopoom.

As for concerns about increasing non-performing loans and debt defaults among SME operators, Paopoom said the two phenomena are not the result of providing more loans but rather of the bank’s stringent loan considerations.

“More loans will enable everyone to stand on their feet, not just SMEs but also supply chain providers, preventing the domino effect of one business’ downfall affecting another,” he said.

The deputy finance minister said that plans are in the pipeline to establish a public organisation to provide loan guarantees for SMEs as an alternative to the Thai Credit Guarantee Corporation.

The organisation, which will issue loan guarantee certificates for a fee, will help share the risk with loan applicants, similar to the business model of insurance.

“With an affordable fee, this model of business has proven to be highly successful in foreign countries,” he added.

Paopoom said the Finance Ministry is hopeful that the economy in the second half of the year will bounce back, thanks to the acceleration in FY2024 budget disbursement in government and state enterprises’ projects, the digital wallet scheme, and other financial measures.

“We are still targeting 5% economic expansion annually as a long-term target. This can be achieved through continued policies in economic development and a variety of financial measures that the ministry is working on,” he said.