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Finance

Thai banks give coronavirus-hit borrowers one-year moratorium

Low-interest loans, tax cuts and deductions also enter fight against epidemic

Thai mortgage holders who are laid off from their jobs amid the coronavirus epidemic will not have to make payments for a year.   © Reuters

BANGKOK -- Thai banks have offered companies hit by the novel coronavirus more time to repay loans.

The debt-relief package, announced by the Thai Bankers' Association, comes on top of state measures to mitigate the epidemic's potential $6.4 billion blow to the country's long-stagnant economy. The yearlong grace period on loan repayments being offered by banks covers companies in the tourism sector, exporters, importers and retailers.

In January alone, 1,407 companies went out of business, up 0.4% from a year earlier, according to data from the Commerce Ministry's Department of Business Development. Analysts expect the number of defunct businesses to increase in February as the coronavirus spreads.

"Several private banks have already contacted their clients to offer help, and there are many borrowers who have accepted the help," Thai Bankers' Association chairman Predee Daochai said. He added it was too early to say how many loans, or the amount, would be eligible for relief.

Hotels, restaurants, airlines and other tourism-related businesses -- a group that contributes around 20% to Thailand's $540 billion gross domestic product -- are particularly vulnerable as many rely on Chinese tourists.

The Tourism Authority of Thailand on Monday further trimmed its forecast for the number of foreign arrivals this year to 33.8 million, down 15% from 2019. It had previously estimated 35 million would show up this year.

If the epidemic subsides by the end of March, Thailand will lose up to 100 billion baht ($3.2 billion) in tourism revenue, according to forecasts. But if the number of infections continues to grow into the second quarter, analysts expect a 200 billion baht revenue shortfall in the tourism and retail sectors.

GDP growth is expected to be sluggish, according to a February forecast by the Office of the National Economic and Social Development Council. The government's economic planning body last month said growth for this year would be in the range of 1.5% to 2.5%. In November, it was expecting GDP to rise 2.7% to 3.7%.

In the Thai Bankers' Association relief package, individuals who are laid off and have mortgages are also eligible for a one-year grace period.

Analysts say the relief measures could trim banks' interest income in the short term. However, the measures are unlikely to have a big negative impact on longer term revenue and performance.

"[Offering] some help to clients now could have some limited impact on banks' income," an analyst at Kasikorn Research Center said. "It is much better for the banks [to do that] than to do nothing and finally get large nonperforming loans at the end that could ruin their performance."

State-owned financial institutions, meanwhile, are agreeing to government requests for debt relief for struggling business operators. In addition, the banks will provide 123 billion baht worth of low-interest, no-fee loans to tourism-related businesses.

SME Development Bank is offering a six-month debt moratorium to borrowers with good track records, Government Savings Bank is offering debt suspensions of up to five years and Thai Credit Guarantee Corp. is suspending credit guarantee fees for 12 months.

The government is stepping up with tax breaks. It is cutting the excise tax airlines pay on jet fuel from 4.726 baht per liter to 0.2 baht per liter through Sept. 30.

It is also allowing companies to deduct twice as much as their expenses for organizing seminars in other provinces this year, and business operators to deduct 1.5 times as much as their spending on renovations.

These measures are expected to cost the government 4.5 billion baht.

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