Consumer confidence dropped to a 21-year low in March as people continue to worry about the rising number of confirmed cases and the State of Emergency (SOE) implemented in Thailand due to the coronavirus outbreak.
According to the University of the Thai Chamber of Commerce (UTCC), the consumer confidence index has dropped from 64.8 in February to 50.3 in March, the lowest in 21 years and 6 months, or last seen since 1998, the year after the Asian Financial Crisis.
The outbreak impact on businesses within the tourism sector and the temporary shutdown of departments stores, entertainment venues and sport complexes have led to more than 1 million unemployed so far, the UTCC said.
The drought is also affecting agricultural outputs and people’s ability to find jobs while crop prices are still low, especially for rice, rubber and cassava. This means that farmers’ purchasing power is low as well, they added.
Thailand’s workforce is around 37 million people. Of that figure, about 11 million are working within the agriculture sector.
“The abnormal situation is having a widespread impact on the economy which is leading tower income for consumers, and their overall confidence does not look good right now,” said Thanavath Phonvichai, president of UTCC.
“More than 5 billion baht worth of purchasing power continue to disappear every day from the normal level of around 20 billion baht per day. Meanwhile, the tourism sector is being affected by 40 per cent less arrivals and if coupled with disappearing domestic tourism, around 700 billion baht worth of expected income for the sector will be gone this year,” he added.
As for the government’s measures to provide cash hand-outs of 5,000 baht per month for six months to 9 million people, that will not be able to stimulate the entire economy as only a small part of the population will benefit from the scheme.
He said the government should consider increasing it to cover 18 million people for three months instead. At the same time, people who are registered to the social security system but have lost their jobs should also be entitled for compensation. Meanwhile, more measures are needed to support companies that have been ordered to temporarily shutdown by the SOE but are still paying wages for their employees, he added.
Kasikorn Research Center said the Bank of Thailand (BOT)’s measures that came out along with the government’s third economic relief package on Tuesday are mainly aimed to increase short-term liquidity for small and medium enterprises (SMEs) that are being affected by the outbreak.
The third package was estimated to be worth at least 1.9 trillion baht (US$57.99 billion), which includes BOT’s soft loan policy of more than 500 billion baht.
The government will also set up a Corporate Bond Liquidity Stabilization Fund (BSF) to allow the central bank to buy private bonds with a credit rating no less than an investment grade. Four-hundred billion baht was set aside for this endeavor.
The research centre said the impact of the soft loan and bond buying measures from the BOT, which together amounted to around 1 trillion baht, on the economy will depend on the approval rate of the soft loans. There are many conditions for the central bank to consider before they can give out the loans, including the readiness of the debtors and the commercial banks’ ability to take in possible loss.
The think tank added that the BSF’s impact on the private bond market will depend on the companies’ ability to raise funds as well. The BSF was designed to help with the rollover of private bonds that reach maturity during the period of drying up liquidity.
“This is one aspect that will have to be monitored as there is still a lot of economic uncertainty at the moment,” they wrote in their latest report on Thursday.
More Help from Banks
Some banks are already coming to action following BOT’s announcement last Tuesday that commercial banks and special financial institutions (SFIs) should postpone principle and interest rate payments for up to six months for SMEs that took out a loan of less than 100 million baht.
- Siam Commercial Bank (SCB) has lowered the interest rate for all types of loan by another 0.40 per cent for six months beginning from April 10 onwards.
The bank said the move was made after the BOT announced they will reduce the amount commercial banks pay into the Financial Institutions Development Fund (FIDF) from 0.46 per cent to 0.23 per cent per year.
SCB’s minimum loan rate (MLR) for large-sized clients will be lowered from 5.775 per cent to 5.375 per cent, while their minimum overdraft rate (MOR) will go down from 6.495 per cent to 6.095 per cent. For retail customers, the minimum retail rate (MRR) will be lowered from 6.745 per cent to 6.345 per cent.
- Bank of Ayudhya (BAY) announced on Thursday they will postpone both principle and interest rate payments for up to six months for SMEs that took out a loan less than 100 million baht.
The bank has also announced a soft loan for customers that that took out a loan of less than 500 million baht. They can take out another 20 per cent of their outstanding at the end of 2019 with an interest rate of 2 per cent for two years. There is no interest payment for the soft loan in the first 6 months.