Measures to Alleviate the Effects of the COVID-19 on the Thai Economy – Phase 3

Royal Thai Government Announcement No. 36/2020, April 2020 – Phase 3

Mr. Uttama Savanayon, the Minister of Finance, announced that in the past, the government has issued measures to mitigate the impact of the pandemic on individuals  and businesses by facilitating funding, reducing costs and offering other fiscal relief mechanisms. The Coronavirus (COVID-19) pandemic, as the strongest pandemic in the past century, has resulted in significant loss of revenue for businesses and households and a decrease in demand for investment and consumption. It also affects the country’s financial system, owing to the decreased number of foreign tourists that otherwise contribute to GDP, the disruption of the domestic supply chain, and an overall slower movement of the world’s economy.

The Ministry of Finance, thus seeks to  identify funding sources to stabilize the country’s economy by requesting a loan through the issuance of a Royal Ordinance. This is because reserve funds according to the Budget Procedure Act are to be allocated for any other emergencies that may occur and to compensate for the loan amount of the budget deficit in the 2020 budget year. In addition, transfer of the current 2020 government expenditure budget that does not need to be used within the fiscal year, additional budgeting for fiscal year 2020, and the estimated annual expenditures for 2021 are all insufficient to meet current needs for additional funding.

On 7 April 2020, Cabinet approved the third phase of joint measures to alleviate the direct and indirect effects of the Coronavirus (COVID-19) on the Thai economy with details as follows:

1.   Improvement and rehabilitation of the economy impacted by COVID-19

The Government has drafted a Royal Ordinance for the issuance of a line of credit not exceeding one Trillion baht. The loan thus issued will be used for the following purposes:

1.1   600 Billion baht for cash handouts for the individuals, farmers, and operators who are affected by COVID-19, as well as helping the medical and public health sectors.

1.2   400 Billion baht allocated to economy recovery measures, with the objective of: 1) increasing production and service capacity and quality in the major economic sectors of the country in order to create jobs and boost market promotion for products linked to tourism or other service sectors 2) creating basic development structure in communities in order to develop local products and boost the local economy 3) promoting and stimulating private and household consumption, as well as promoting and stimulating various private sector investments,  that will bring consumption and investment conditions back to normal levels.

2.   Measures for economic and financial stability

Together, the Ministry of Finance and Bank of Thailand have set up guidelines for economic and financial stability during the COVID-19 emergency. Small- and Medium-sized Enterprises (SMEs), which comprise 80% of the country’s employers, are currently experiencing liquidity problems, which may result in termination of employment and defaulted loan payments. At the same time, fluctuation in the financial markets may prevent companies from redeeming debt securities that are due. This affects investors’ trust and reduces the efficiency of raising funds. Therefore, the Government has drafted two Royal Ordinances as follows:

2.1   Provision of financial assistance to SMEs who are affected by the COVID-19 outbreak issuing soft loans up to THB 500 Billion. The Bank of Thailand is able to provide soft loans to commercial banks and specialized financial institutions at 0.01 percent annual limit, with a budget of 500 Billion baht, to release new loans to SMEs with the same outstanding credit amount not exceeding 500 million baht. The SME must not be in the international market nor have Non-Performing Loans (NPLs) as of 31 December 2019. SMEs will receive additional credit not exceeding 20% of the original loan amount (up to a maximum amount of THB 100 million) and the interest rate will not exceed 2% per annum. Additionally, creditworthy debtors will enjoy a six-month grace period on principal and interest payments for both the new loan as well as the pre-existing loan.

2.2   Establishment of the Corporate Bond Stabilization Fund: BSF. The Bank of Thailand will buy and sell investment units in said fund in order to promote market functioning. The fund will buy bonds to help increase the liquidity of high-quality companies, which have experienced a temporary liquidity shortage due to the COVID-19 pandemic. Companies can roll over shares and the Bank of Thailand can buy investment units of the fund not exceeding 400 Billion baht. In addition, the Bank of Thailand can buy and sell private equities in the secondary market in the event that it is necessary and urgent to maintain stability of the private equities and financial system markets.

3.   Other aid measures, which includes three measures as follows:

3.1   One-year extension of deposit protection for deposits not exceeding 5 million baht to August 10, 2021 from August 10, 2020, in order to maintain economic stability and strengthen the financial system.

3.2   Low-interest credit measures for non-financial business operators (non-banks) issued by the Government Savings Bank in order to help small debtors with credit loans, leasing, hire purchase, car and motor vehicle leasing and purchasing, as well as car title loans.

3.3   Temporary interbank lending rate cuts to 0.23% per annum from 0.46% per annum, so that financial institutions will incur lower costs, leading to the reduction of interest rates and help alleviate the burden on businesses and individuals.

The Ministry of Finance intends that the third phase of joint measures be an important foundation in stabilizing the country’s economy after the end of the COVID-19 crisis. The Ministry of Finance will monitor the situation closely and remains ready to take appropriate measures to safeguard the Thai economy, as the situation requires.



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