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Export-led Thailand to unveil stimulus package as trade war hurts growth

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Thailand is set to announce a fiscal stimulus package to shore up growth as the U.S.-China trade war and currency strength sap its export-reliant economy.

[BANGKOK] Thailand is set to announce a fiscal stimulus package to shore up growth as the U.S.-China trade war and currency strength sap its export-reliant economy.

There’s potential for 60 billion baht (S$2.7 billion) to 80 billion baht of stimulus steps, with every 30 billion baht able to lift economic growth by 0.1 percentage point, Siam Commercial Bank Pcl estimates. The government is expected to provide details of the package after a ministerial meeting on Friday.

Calls are growing for governments around the world to loosen their budgets to tackle economic slowdowns. Central banks say they can’t do the job with monetary stimulus alone. The Bank of Thailand unexpectedly lowered borrowing costs this month, but elevated household debt limits its scope for aggressive easing.

“Current math for the 2020 fiscal year suggests that there is ample room to increase spending and still keep within statutory limitations for the deficit and public debt levels,” said Radhika Rao, an economist at DBS Group Holdings in Singapore.

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Thai gross domestic product likely rose 2.3 per cent in the second quarter - the weakest pace in almost five years - as exports and tourism struggled, a Bloomberg survey shows. The nation is vulnerable to US-China tension, as Asia’s top economy is its largest trading partner and biggest source of tourists.

The planned stimulus package is worth less than 100 billion baht and will help farmers while also boosting investment, tourism and consumption, Finance Minister Uttama Savanayana said Thursday.

Currency strength is another challenge for Southeast Asia’s second-largest economy. The baht is up more than 5 per cent against the dollar this year, making it one of the strongest performers in emerging markets.

Exports may contract as much as 2.7 per cent this year, and 2019 economic expansion could fall short of 3 per cent without a stimulus package, said Kampon Adireksombat, head of economic and financial market research at Siam Commercial Bank.

REUTERS