BANGKOK – Thailand’s military backed government approved plans for stimulus measures worth a combined 364 billion baht ($11.2 billion) on Wednesday in a bid to revive an economy laid low by months of political unrest.
Southeast Asia’s second-largest economy suffered a virtual paralysis in policy-making and uncertainty among investors in the months leading up to a military coup in May. Weak exports added to Thailand’s woes as its economy contracted 0.1 percent in the first half of this year.
Deputy Prime Minister Pridiyathorn Devakula said the measures announced would help the economy return to its normal growth of 4-5 percent next year.
“After the termination of the marathon political protest and the establishment of the current government, there is a good chance for the economy to set off for steady growth again,” he told reporters.
Speaking after a cabinet meeting on the first day of Thailand’s fiscal year, Pridiyathorn said the economy would begin feeling the benefits in the current quarter.
“Overall, the measures to stimulate the whole economy will use a total of 324.5 billion baht ($10 billion),” he said, adding that an additional 40 billion baht would be spent on one-off payments to farmers to support rice production.
“Current rice prices are lower than costs, so the government must help. But it will be for this year only,” he said.
The other measures would target creating jobs and income as well as repairing schools, hospitals and irrigation systems, Pridiyathorn said.
“This is high-powered money that will boost income for people with the least income,” he said.
The total value of the measures given by Pridyathorn, who is in charge of economic matters, was around three times the size of a figure given hours earlier by the prime minister.
General Prayuth Chan-ocha, who led the military coup, had said that his government had approved measures worth over 100 billion baht.
Prayuth, whose government is expected to remain in power for at least a year before new elections are called, has said populist policies or costly projects that might burden a future administration will be avoided.
Protests that had precipitated the ousting of former Prime Minister Yingluck Shinawatra had focused on populist policies her critics said were used to buy votes.
USING UNSPENT FUNDS
Pridiyathorn gave a breakdown of how the government would budget for the 324.5 billion baht. He said 129.5 billion baht had been added to the new 2015 budget, while 147 billion baht that remained unspent from the fiscal year just ended would be used. And some 48 billion baht of unused government funds had been found, going back as far as 2005, he added.
How fast the government could put the money into action was crucial for the economy’s recovery, according to analysts.
“The subsidy for rice farmers could shore up their consumption in the near term. On construction projects, the impact may take time. Speeding up disbursements is key for the government to tackle,” Kampon Adireksombat, economist with Tisco Securities, said.
Wednesday’s cabinet meeting was the third since the appointment of a cabinet stacked with military figures last month and the most significant to date.
The junta had already administered what was effectively a swift cash injection into the rural economy shortly after taking power by paying billions of dollars owed to rice farmers through a failed subsidy scheme that was created by Yingluck’s government.
The military government has also extended tax breaks and subsidies for some fuel and public transport.
Last week, the central bank cut its forecast for 2014 export growth to zero from 3 percent but maintained that the economy can expand 1.5 percent this year.
For 2015, it predicts economic growth of 4.8 percent, down from 5.5 percent seen previously.
by Amy Sawitta Lefevre; Writing by Orathai Sriring; Editing by Simon Cameron-Moore