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Thailand set to borrow US$46b to fund virus recovery

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Thailand will borrow US$46 billion next year as the Southeast Asian nation expands its fiscal stimulus measures to counter the economic impact from the coronavirus pandemic amid dwindling state revenue.

[BANGKOK] Thailand will borrow US$46 billion next year as the Southeast Asian nation expands its fiscal stimulus measures to counter the economic impact from the coronavirus pandemic amid dwindling state revenue.

A Cabinet meeting chaired by Prime Minister Prayuth Chan-Ocha on Tuesday approved borrowing of 1.47 trillion baht (S$63.6 billion) in the fiscal year starting Oct 1, according to a government statement Tuesday. The fund-raising is seen down 11 per cent from a revised 1.66 trillion baht this year, official data show.

The borrowing will be used to finance various economic stimulus programs, budget deficit, infrastructure investments and bailout of some pandemic-hit state enterprises, the government said. The public debt-to-GDP ratio will widen to 57.23 per cent in 2020-21, near the legal limit of 60 per cent, it said.

Thailand's government and the central bank jointly unveiled a 1.9 trillion baht stimulus early this year to cushion the blow from the pandemic but has so far spent only about a third of the amount. The central bank last week called for "more targeted and timely" government policies to support the recovery in the tourism and trade reliant economy, that's on course for its worst-ever contraction.

With the government spending and borrowings running below planned levels this year, risks of an increase in full-year borrowings is only a tail risk, according to Radhika Rao, an economist at DBS Group Holdings in Singapore. Thailand's relative success in containing the pandemic curve has helped in the outperformance of its sovereign bonds with yields remaining largely stable and attracting haven flows, she said.

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The Cabinet also approved 291 billion baht investment by 44 non-listed state enterprises next fiscal year, Rachada Dhnadirek, a government spokeswoman, told reporters in Bangkok. The government is targeting a disbursement rate of 95 per cent of the budget, which will finance key projects such as the industrial estate in the Eastern Economic Corridor and the mass transit project in Phuket, she said.

The total investment of state enterprises, including eight publicly listed firms, will increase to 432 billion baht and is set to boost the economy, Ms Rachada said.

A series of stimulus measures meant to drive consumption in the fourth quarter may help contain the hit to Thailand's growth this year, Finance Ministry's Fiscal Policy Office Director-General Lavaron Sangsni said. The economy may contract less than the 8.5 per cent predicted by the ministry and 7.8 per cent estimated by the central bank, he said.

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