(Bloomberg) — Thailand’s new government plans to expedite a sweeping debt restructuring to tackle an estimated $474 billion of household liability, offer financial assistance to small businesses and accelerate fiscal stimulus to lift growth.
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The debt revamp will cover the entire system, and will be especially targeted at providing relief to borrowers of car and home loans, according to a draft policy statement seen by Bloomberg News. Prime Minister Paetongtarn Shinawatra is due to announce the plans in parliament on Sept. 12.
The initiative will also cover the informal sector, and will be implemented through state-owned financial institutions, commercial banks and asset management companies.
The government is concerned about household debt that’s at more than 16 trillion baht ($474 billion) — equivalent to over 90% of gross domestic product — and rising non-performing loans, Paetongtarn is set to say. The indebtedness is driving inequality between the rich and poor, with development concentrated mainly in Bangkok and major cities, the prime minister will say.
The policy statement will list out priorities of Paetongtarn’s coalition government that’s led by her Pheu Thai Party and backed by a clutch of pro-establishment and royalist groups. The youngest daughter of influential former leader Thaksin Shinawatra was elected by parliament last month after her predecessor Srettha Thavisin was dismissed by a court over an ethical violation.
Paetongtarn, the third member of the influential Shinawatra clan to lead the country, faces the challenge of boosting a $500 billion economy that’s lagged its neighbors with an average 1.9% growth rate during nearly a decade of military-backed rule.
Thailand’s youngest premier will also need to reassure foreign investors that she can provide a stable administration, eschew any clashes with the central bank, and drive policies to reverse a slump in manufacturing and sustain tourism recovery.
“If there are no financial and fiscal measures that support economic expansion, the country’s economic growth rate is expected to be no more than 3% per year,” which will push public debt close to the legal ceiling of 70% of GDP in 2027, Paetongtarn will say. “Therefore, it is a great challenge that the government must urgently restore the country’s economy to grow strongly again soon.”
While Paetongtarn’s administration is set to continue most of the policy initiatives introduced by Srettha, it also borrows from a road map to build a new Thailand unveiled by her father Thaksin last month. The policy statement underscores the need to accelerate economic stimulus but doesn’t spell out details of the controversial cash handout plan pursued by Srettha’s administration.
Digital Wallet
The premier will tell parliament there is a need “to build confidence, and encourage spending, along with alleviating the burden of expenses and increasing opportunities for employment, with priority given to vulnerable groups and the promotion of the digital wallet project, which will lay the foundation for the digital economy.”
After a special Cabinet meeting on Saturday, Paetongtarn said her government will push ahead with the so-called digital wallet program that promises 10,000 baht each to about 50 million adult Thais and it will adhere to law. About 14.5 million people, including 1 million with disabilities, may be covered in the first phase of the program in September, officials have previously said.
The strategy to help small and medium enterprises, which account for about 35% of the Thai workforce and GDP, will include debt suspension, access to liquidity and steps to shield them from unfair foreign competition through online platforms, according to the policy blueprint.
The new government will accelerate the process of drafting a constitution that’s more democratic, enshrine human rights, ensure political stability and guarantee the rule of law.
“Thailand has been facing political instability and intense ideological conflicts for a long time, affecting the confidence of investors both domestically and internationally and continuously affecting economic growth,” Paetongtarn is set to say. “Therefore, this government must restore the confidence of both Thais and foreigners by developing politics in a democratic regime to be strong, stable, have the rule of law and transparency.”
Other key policies mentioned in the draft are:
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Reducing energy and utility prices by tweaking rules on direct purchase of power, creating strategic petroleum reserves and exploring additional energy sources including those in overlapping claim area with Cambodia
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Revamping the tax structure to prioritize income distribution and bringing more than 50% of the grey economy into the tax net
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Studying the feasibility of a negative income tax system where low-income earners will receive “step-by-step tax refunds”
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Promoting tourism by revamping visa structure for MICE groups and for so-called digital nomads, adding amusement parks, entertainment complexes and hosting concerts, global sporting events
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Accelerating free trade agreements negotiations with major trading partners and preparing to become a member of the Organisation for Economic Co-operation and Development
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Ensuring effective implementation of the marriage equality law
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Continuing to invest in large-scale transportation projects, new airports and promoting the landbridge proposal with the private sector
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Focusing on developing a wellness and medical hub, including medical cannabis
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Amending laws to position Thailand as a financial hub
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Supporting Thailand as a source of clean energy production, developing free electricity trading markets and carbon credits
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Solving the drug menace decisively and comprehensively, starting from cutting off the source of production and distribution by cooperating with neighboring countries
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