16-7-2024 (BANGKOK) In a bold move to stimulate economic growth and support small enterprises, the Thai government has greenlit a substantial soft loan programme worth 100 billion baht (approximately $2.4 billion). The initiative, approved by the cabinet on Tuesday, aims to inject much-needed capital into the country’s financial system and provide a lifeline to smaller businesses struggling to secure affordable loans.
Deputy Finance Minister Paopoom Rojanasakul, speaking to reporters after the cabinet meeting, outlined the scheme’s structure. The state-owned Government Savings Bank will provide liquidity to commercial banks at a remarkably low interest rate of 0.01 per cent. These funds will then be made available to small businesses at a capped rate of 3.5 per cent for a three-year period, significantly undercutting the current retail lending rates which exceed 7 per cent.
“This will inject capital into the system,” Paopoom explained, emphasising that the measures would be financed from the state bank’s resources rather than the national budget. The programme is designed to address the tightening of lending practices by banks, a trend that has emerged amidst a sluggish economic recovery and rising levels of bad debt.
The soft loan scheme is part of a broader set of economic measures promised by Prime Minister Srettha Thavisin. Additional support, including measures to offset high electricity prices, is expected to be announced next week as the government seeks to jumpstart growth in Southeast Asia’s second-largest economy.
This latest initiative follows a move in April where Thai banks agreed to reduce lending rates by 25 basis points for vulnerable groups over a six-month period, responding to a request from the Prime Minister. Srettha has been vocal in his calls for the central bank to cut interest rates to bolster the economy. However, despite this pressure, the Bank of Thailand has maintained its key interest rate at 2.50 per cent for four consecutive meetings.
The central bank’s growth forecast for the Thai economy stands at 2.6 per cent for the current year, a modest improvement from the 1.9 per cent growth recorded last year, which lagged behind regional peers.
