Bangkok -- The Bank of Thailand revised down its 2021 growth forecast, as the resurgence of COVID-19 in Southeast Asia's second largest economy over the last few months had led to the closure of some businesses.
The central bank said Wednesday it now expects the economy to grow 3.0% this year instead of the 3.2% it forecast in December. The view is in line with that of the Ministry of Finance, which lowered its growth forecast from 4.5% to 2.8% in January.
Thailand had reported a total of 28,346 COVID-19 cases since early 2020. Of those, 24,109, or 85%, of the infections were reported after mid-December. Clusters of infections were found in several provinces including Bangkok.
Thailand's nightlife industry such as bars and nightclubs had to close in this second wave, while dining hours were restricted and restaurants banned from serving alcohol. As a result, some of Bangkok's time-honored restaurants and bars had gone out of business.
"The recovery would remain uneven across economic sectors," the bank's monetary policy committee warned in its policy statement. "Significant risks include the efficacy and distribution of COVID-19 vaccination, the recovery in foreign tourist figures, and the continuity of fiscal support," it said.
Despite this, the Bank of Thailand did not cut rates any further and instead, kept its one-day repurchase rate at the historical low of 0.50%. The central bank said it would offer new loan programs for the hardest-hit businesses to mitigate the impact of the resurgence.
"The committee encourages the expedition of the new financial rehabilitation measures to support business recovery post-COVID-19 to ensure [the] distribution of liquidity to the affected groups in a targeted manner, reduce debt burden and support the economic transformation in the period ahead," the bank said.
On Tuesday, the bank announced it would set aside 350 billion baht ($11.3 billion) in aid measures. Of that, 250 billion baht will be used to provide soft loans. These loans would be available to business operators whose credit line is no more than 500 million baht as of Feb. 28 and who are not viewed as bad credit as of December 2019. New borrowers with no existing credit line can also apply to participate in the program.
The bank had offered 500 billion baht in soft loans in April 2020 at 0.01% interest to financial institutions for two years in the hopes that they will re-lend to small- and medium-sized enterprises with a maximum credit line of 500 million baht at 2% interest. But only 132 billion baht, or 26.6%, of the quota, has been used.
In the new soft loans scheme, financial institutions are allowed to charge interest rates not higher than an average of 5% per annum for five years. The central bank expects that the higher incentives will encourage commercial banks to lend out more money to disadvantaged SMEs.
The rest of the 350 billion baht will be used as "asset warehousing," whereby debtors use their assets as collateral with rights to buy back or to rent the assets later on. "Such [a] scheme would shield businesses from having to sell collateral at fire-sale prices and provide opportunity to continue their business through the recovery," said the bank. The debtors will have five years to buy assets back with carry costs of 1% per annum.
"While financial institutions should accelerate debt restructuring, fiscal measures must continue to sustain the economy," the Bank of Thailand reiterated in its policy statement.
On Tuesday, the government also announced the extension of its travel stimulus package to August, from its initial expiry date of April. The government said it expects 2 million more Thais to travel during the extension period.
Under the program, the government will pay 40% of room rates up to 3,000 baht per night for up to five nights per person. Although numerous hotels and guesthouses had been found to have defrauded the government of this subsidy, tourism-dependent Thailand cannot afford for domestic travel to dry up.
Thai economy contracted 6.1% in 2020, the biggest fall in more than two decades, according to the government. The economy shrank 7.6% in 1998 amid the Asian financial crisis.