Thailand, grappling with an unprecedented fall in key exports, is planning a Bt2,000bn ($56bn, £39bn, €44bn) five-year stimulus programme to absorb the unemployed and boost infrastructure.
Figures released on Thursday showed exports fell by more than 26 per cent in January, capping a 14 per cent fall in December. Tarisa Watanagase, the governor of the Bank of Thailand, said its last estimate of an annual fall in exports of between 5.5 and 8.5 per cent was looking optimistic.
Exports account for some 60 per cent of the Thai economy. In a country that has seen annual export growth of between 15 and 20 per cent for the past five years, the precipitous fall-off in global demand has hit hard.
Korn Chatikavanij, the new finance minister, said he believed that Thailand would have zero gross domestic product growth this year, a further lowering of expectations after saying just five weeks ago that 2 per cent growth was not out of the question.
Although Thailand has not seen the sort of widespread unemployment that is starting to create problems in China, the government expects the number out of work to climb above 1m from its recent level of about 350,000.
The government has already released a supplementary budget of Bt115bn to effect a quick demand boost. That six-month programme is supposed to come into effect at the beginning of next month. Mr Korn said the new five-year plan would pick up where that left off.
“We are now focused on medium and long-term programmes designed to continue to provide a spur to the economy but also to lift the long-term competitiveness,” he said.
“It is designed to improve logistics, irrigation, mass transit, communications and other schemes that we think will benefit Thailand in the longer term.”
Mr Korn said roughly half of the stimulus would come from the budget and confirmed that the government was in negotiations with the World Bank, the Asian Development Bank and the Japan International Co-operation Agency to raise a standby facility of some $2bn for budget support this year.
The rest would come from domestic and international loans.
“Our borrowing capacity is still very good,” Mr Korn said. Regional concerns that government borrowing to support stimulus packages would raise the cost of capital for industry were not well founded in the case of Thailand, he said.
Mr Korn, a former head of JPMorgan Chase in Thailand, estimated that the collapse in global demand was costing the country approximately Bt1,000bn annually in lost export growth. Given that almost 60 per cent of that value was due to imported components, the new stimulus budget would almost exactly replace the Bt400bn shortfall.
Mr Korn did admit, however, that given the country’s export profile – it is a major producer of cars and electronics, both of which have been hard hit recently – there were some difficult adjustments ahead.