Fiscal Stimulus Package

1
Fiscal Stimulus Package
Ministry of Finance, Kingdom of Thailand
2
Current economic situation
Leading Indicator of economic segments showed
negative trends
Real agricultural income
Real VAT revenue
2007 GDP THB. 9.09 trillion
YOY
YOY
Retail
2551
2551
Agriculture
13.9
8.7
Real estate tax revenue
Export
YOY
YOY
Manufacturing
Real Estate
3.9
39.6
2.3
Construction
2551
2551
3.7
Hotels restaurants
10.1
Industrial production
No. of tourists
Transport
YOY
YOY
2551
2551
GDP figures for 2009 have been revised down to 1
(from 4-5) due to ongoing global and local
economic slowdown
3
Fiscal stimulus programs
Economic stimulus package
Main components of the governments fiscal
spending
Supplementary budget THB 116.7bn
1
Tax measures
2
Utilize Special Financial Institutions to
increase credit in the system by THB 300bn
Approved budget
3
State budget THB 1.84trn
Expedite disbursement of budget
4
SOE investment budget THB 308bn
Municipal investment budget THB 366bn
2009 multi-year commitment budget extending to
2010, 2011, 2012 and 2013 are THB 120bn, THB
50bn, THB 10bn and THB 2bn, respectively
Push forward investment projects
5
Mega Projects plan THB 1.7trn (Mass Transit THB
440bn, Transportation and communication THB
440bn, Energy THB 370bn)
4
Economic stimulus programs
Policy and target groups
Policy
Target
Short-term stimulus measures
Medium to long-term stimulus measures
5
Supplementary budget
1
Reduce living cost / Increase purchasing power /
Distribute income and create rural employment
(THB mm)
Low-income earners

• One-time living cost allowance of THB 2,000 for
  those earning lt THB 15,000 per month
• 8.1mm Social Security fund members
• 1.3mm civil servants (including retirees)

18,970
Households

• Extend 5 public service subsidies program for 6
  months

11,409
Unemployed

• 1 month training and 3 months wage subsidy
• Approx. 240,000 people

6,900
Parents/Students

• Free education for 15 years
• Approx. 10mm students

19,000
Healthcare

• THB 600 per month stipend for community
  healthcare workers
• Approx. 830,000 workers
• Improve standards of 2,609 health service stations

3,000
1,095
Rural communities

• Sufficient Economy Fund for Improvement in
  Quality of Life
• Funds for 78,358 villages

15,200
6
Supplementary budget
1
Reduce living cost / Increase purchasing power /
Distribute income and create rural employment
(THB mm)
Senior citizen

• Old-age support payment of THB 500 per month
• Approx. 5mm people

9,000
Infrastructure

• Rural irrigation network
• Small reservoirs construction
• Rural roads construction

2,000 760 1,500
Police force

• 532 public housing estate for low-ranked police
  force

1,808
Tourism

• Support tourism industry

1,000
Others

• Ministry of Commerces measures to reduce living
  expenses
• Development of food industry and SMEs
• Rebuilding confidence in and image of Thailand

1,000 500 325
Contingency fund

• For emergency use or as necessary

4,091
Total THB 97,558 mm
7
Tax measures
2
Reduce tax burden / stimulate spending in target
sectors / encourage restructuring
Real estate

• Payment for new residential properties is
  tax-deductible up to THB 300,000 (transferred in
  2009)
• Property-transfer fee, special business tax, and
  withholding tax waived (until March 2010)
• Mortgage interest expense is tax-deductible up to
  THB 100,000/yr (on-going)

SMEs

• Increase minimum taxable revenue to THB 1,000,000
  (from THB 60,000)
• Approx. 1,000,000 small medium enterprises

Community businesses

• Increase minimum taxable revenue to THB 1,800,000
  (from THB 1,200,000)
• Approx. 58,000 registered community businesses

Venture Capital

• Minimum investment requirement in SME for the
  first year is waived for registered venture
  capital firms
• Tax on transfer of SME shares is waived

Tourism

• Expenses related to domestic seminars in 2009
  (including hotel rooms) are tax-deductible at
  twice their actual value

Debt restructuring

• Taxes and fees are waived for income from debt
  reduction or retirement, and from transfer of
  assets in connection to debt restructuring (2009)

Business reorganization

• Taxes and fees related to transfer of partial
  business reorganization are waived (2009)

8
Special Financial Institutions
3
Increase liquidity for businesses by utilizing
SFIs to support and guarantee loans
Credit (THB mm)
Government Savings Bank

• Small personal loans
• Non-collateralized loans for small businesses

Bank for Agriculture and Agricultural Cooperatives

• Rural Labour Repatriation fund
• Loans to develop local communities
• Support rubber prices
• Increase subsidies for agriculture (currently
  110,000mm)

10,000 25,000 4,000 12,000
EXIM Bank

• Export credit insurance scheme

150,000
SME Bank

• Soft loan to commercial banks to encourage lending

100,000
Small Business Guarantee Corp

• Provide partial guarantees on loans to small
  businesses

12,000
Government Housing Bank

• Mortgages and reduce interest expense

10,000
Islamic Bank

• Loans to develop communities in the southern
  region

10,000
Note THB 10bn capital injection for SFIs (SME
Bank THB 2bn, EXIM Bank THB 5bn, SBGC THB3bn)
9
Municipal investment budget
State budget
SOE investment budget
Expedite disbursements
4
Increase purchasing power / Distribute income
create rural employment / Increase liquidity for
businesses
Estimate from 2008 income of municipalities and
average income and expenditure from past 5 years
10
Approved budget
Push forward investments
5
Medium to long-term stimulus measures
4
State budget THB 1.84trn
Prepare a budget deficit
SOE investment budget THB 308bn
SOE investment Budget THB 257bn
SOE investment Budget THB 309bn
SOE investment Budget THB 355bn
Municipal inv. budget THB 366bn
Amend rules on municipal spending
Amend rules on municipal spending
Amend rules on municipal spending
2009 multi-year commitment budget extending to
2010, 2011, 2012 and 2013 are THB 120bn,
THB 50bn, THB 10bn and THB 2bn, respectively
5
Mega Projects plan THB 1.7trn (State portion
THB 1.16trn, SOE portion THB 570bn)
State portion of investments
Include SOE Mega Project portion
11
Distribution of benefits
Designed to provide even distribution of benefits
Unemployed,
Sufficient economy fund
Living cost allowance
Salaryman
Community health workers
farmers,
Health service stations
5 measures 6 months
Community loan
Small personal loans
Labour repatriation loan
Small loan guarantees
local communities
Free education
Job training
Irrigation
Senior pension
Rural roads
Mortgages
Tax measures
Tax incentives for home buyers
Agricultural subsidies
Tourism industry
Food industry
Tax measures
SME
SME loan
1
Export insurance
Supplementary budget Tax measures Small
personal loans
2
Private sector
3
12
Fiscal discipline
Retain fiscal discipline while provide room for
more stimulus if needed
2009 borrowing limit (THB mm)
Borrowing plan (THB mm)
2009 budget
249,500
Loan to finance budget deficit
Economic and social development projects
(committed)
437,940(1)
29,790
Economic and social development loan
132,000
Estimated decrease in 2009 revenue
Efficient cash management can reduce borrowing
requirement
183,500(2)
116,700
2009 Supplementary budget
621,440
527,990
93,450
Remaining borrowing capacity for Fiscal Year 09
Ratio of public debt to GDP is 42 / Ratio of
annual borrowing to total budget is 15
(1) 20 of 2009 budget including supplementary
budget of THB 1,935,000mm (including
supplementary budget) 80 of THB 63,676mm loan
repayment budgeted (2) 10 of 2009 budget
(excluding supplementary budget)
12
13
Expected outcome
Expected impact on GDP growth
Impact to GDP
1.0
/ year
Supplementary budget
Immediate spending of THB 100bn
0.06
Tax measures
/ year
Every THB 10bn of tax savings
New loans
0.2
/ year
Every THB 300bn of increase lending
Government budget
0.1
/ year
Every THB 25bn of spending over estimated
investment plan
SOEs investment
Municipal budget
2009 budget
0.1
/ year
Every THB 25bn of government spending
Mega Projects
13
14
Goals of the stimulus package
Immediate action as well as laying the foundation
for long-term sustainable growth
1
Push forward investment projects
?
09 Supplementary Budget
Increase GDP by at least 1
5
?
Minimum GDP growth of 2 in 2009
2
Expedite budget disbursement
GDP
?
Unemployment between 2.0-2.5
Tax measures
?
Create THB 12,900mm in revenue for the State
4
Increase lending through use of SFIs
?
Maintain a disciplined and sustainable budget
3
The government will likely maintain an
expansionary fiscal policy through 2010