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Fiscal Stimulus Package Fiscal Stimulus Package Ministry of Finance, Kingdom of Thailand 1 Current economic situation Fiscal Stimulus Package Leading Indicator of economic segments showed negative trends Real VAT revenue % YOY 2007 GDP THB. 9.09 trillion Real agricultural income % YOY 16.1 3.6 12.1 9.4 0.1 2550 Q1 Q2 32.9 36.9 11.5 Q3 -0.8 Retail Q4 2550 2551 4.1 Q1 Q2 Q3 Q4 2551 13.9% Export % YOY Agriculture 8.7% % YOY Real estate tax revenue 29.3 12.1 10.9 14.1 22.2 11.6 Real Estate 3.2 Construction 2550 Manufacturing 2550 Q1 Q2 Q3 Q4 2551 39.6% -12.1 10.1% % YOY Industrial production -0.8 Q1 Q2 Transport Q1 Q2 14.9 Q3 2551 Q4 -5.6 No. of tourists % YOY 9.4 4.7 5.8 2550 Q3 Hotels & restaurants 11.6 8.1 2551 13.3 -3 Q4 -4.7 2550 Q1 Q2 Q3 2551 Q4 -13.1 GDP figures for 2009 have been revised down to 1% (from 4-5%) due to ongoing global and local economic slowdown 2 Fiscal stimulus programs Fiscal Stimulus Package Main components of the government’s fiscal spending 2009 2010 2011 2012 2013 Economic stimulus package 1 Supplementary budget THB 116.7bn 2 Tax measures Utilize Special Financial Institutions 3 to increase credit in the system by THB 300bn Approved budget 4 Expedite disbursement of budget State budget THB 1.84trn SOE investment budget THB 308bn Municipal investment budget THB 366bn 5 Push forward investment projects 2009 multi-year commitment budget extending to 2010, 2011, 2012 and 2013 are THB 120bn, THB 50bn, THB 10bn and THB 2bn, respectively Mega Projects plan THB 1.7trn (Mass Transit THB 440bn, Transportation and communication THB 440bn, Energy THB 370bn) 3 Economic stimulus programs Fiscal Stimulus Package Policy and target groups Policy Target Short-term stimulus measures Low-income earners / Labour workers / Farmers / SME Reduce living expenses / increase purchasing power Widespread distribution of income and create rural employment Increase liquidity for businesses – Commercial banks have liquidity but have credit concerns – Utilize SFIs to support/guarantee lending Reaches the hands of people and business operators immediately – Utilize existing channels of disbursement for budget and loans – Minimize usage of bureaucratic channels Measures to deal with layoffs and unemployment – Re-train laid-off labor force for reemployment in desired sectors Sectors which have strong impact on GDP, with high multiplier effect Sectors which remain competitive but lack short-tern liquidity Manufacturing and Export / Agriculture / Tourism and Services / Construction and Real Estate Medium to long-term stimulus measures Prepare a disciplined and sustainable 2010 budget deficit Ensure that approved projects proceed as planned Approve and start long-term projects per investment plan 4 1 Supplementary budget Fiscal Stimulus Package Reduce living cost / Increase purchasing power / Distribute income and create rural employment (THB mm) • One-time living cost allowance of THB 2,000 for those earning < THB 15,000 per month – 8.1mm Social Security fund members – 1.3mm civil servants (including retirees) 18,970 • Extend 5 public service subsidies program for 6 months 11,409 • 1 month training and 3 months wage subsidy – Approx. 240,000 people • Free education for 15 years – Approx. 10mm students • THB 600 per month stipend for community healthcare workers – Approx. 830,000 workers Improve standards of 2,609 health service stations 3,000 “Sufficient Economy Fund for Improvement in Quality of Life” – Funds for 78,358 villages 15,200 Low-income earners Households Unemployed Parents/Students Healthcare Rural communities • • 6,900 19,000 1,095 5 1 Supplementary budget Fiscal Stimulus Package Reduce living cost / Increase purchasing power / Distribute income and create rural employment (THB mm) 9,000 • Old-age support payment of THB 500 per month – Approx. 5mm people Infrastructure • • • Rural irrigation network Small reservoirs construction Rural roads construction 2,000 760 1,500 Police force • 532 public housing estate for low-ranked police force 1,808 Tourism • Support tourism industry 1,000 Others • • • Ministry of Commerce’s measures to reduce living expenses Development of food industry and SMEs Rebuilding confidence in and image of Thailand 1,000 500 325 Contingency fund • For emergency use or as necessary 4,091 Senior citizen Total THB 97,558 mm 6 2 Tax measures Fiscal Stimulus Package Reduce tax burden / stimulate spending in target sectors / encourage restructuring • Real estate • • Payment for new residential properties is tax-deductible up to THB 300,000 (transferred in 2009) Property-transfer fee, special business tax, and withholding tax waived (until March 2010) Mortgage interest expense is tax-deductible up to THB 100,000/yr (on-going) SMEs • Increase minimum taxable revenue to THB 1,000,000 (from THB 60,000) – Approx. 1,000,000 small & medium enterprises Community businesses • Increase minimum taxable revenue to THB 1,800,000 (from THB 1,200,000) – Approx. 58,000 registered community businesses • Minimum investment requirement in SME for the first year is waived for registered venture capital firms Tax on transfer of SME shares is waived Venture Capital • Tourism • Expenses related to domestic seminars in 2009 (including hotel rooms) are tax-deductible at twice their actual value Debt restructuring • Taxes and fees are waived for income from debt reduction or retirement, and from transfer of assets in connection to debt restructuring (2009) Business reorganization • Taxes and fees related to transfer of partial business reorganization are waived (2009) 7 3 Special Financial Institutions Fiscal Stimulus Package Increase liquidity for businesses by utilizing SFIs to support and guarantee loans Credit (THB mm) Government Savings Bank • • Small personal loans Non-collateralized loans for small businesses Bank for Agriculture and Agricultural Cooperatives • • • • Rural Labour Repatriation fund Loans to develop local communities Support rubber prices Increase subsidies for agriculture (currently 110,000mm) EXIM Bank • Export credit insurance scheme 150,000 SME Bank • Soft loan to commercial banks to encourage lending 100,000 Small Business Guarantee Corp • Provide partial guarantees on loans to small businesses 12,000 Government Housing Bank • Mortgages and reduce interest expense 10,000 Islamic Bank • Loans to develop communities in the southern region 10,000 Note – THB 10bn capital injection for SFIs (SME Bank THB 2bn, EXIM Bank THB 5bn, SBGC THB3bn) 10,000 25,000 4,000 12,000 8 4 Expedite disbursements Fiscal Stimulus Package Increase purchasing power / Distribute income & create rural employment / Increase liquidity for businesses State budget SOE investment budget Municipal investment budget THB 1.84trn THB 308bn THB 366bn* Quarterly distribution (% of ’09 budget) 24 / 25 / 25 / 26 27 / 23 / 23 / 27 N/A Past spending (avg. last 3 years) 94% 70% N/A Actual spending Oct 08 - Dec 08 88% 70% N/A Total budget Measures to expedite spending Regular spending report to the Cabinet Responsible ministers to monitor the spending of related departments Responsible ministers to monitor the spending of their respective SOEs PTT, EGAT, THAI, MRT, AOT, TOT, etc. Accelerate budgetary spending according to implementation plan Accelerate the budgetary spending of municipalities Amend Ministry of Interior’s rules on municipal spending and borrowing to expedite future budget disbursement * Estimate from 2008 income of municipalities and average income and expenditure from past 5 years 9 5 Push forward investments Fiscal Stimulus Package Medium to long-term stimulus measures 2009 2010E 2011E 2012E 2013 Approved budget 4 State budget THB 1.84trn Prepare a budget deficit SOE investment SOE investment SOE investment SOE investment budget THB 308bn Budget THB 355bn* Budget THB 309bn* Budget THB 257bn* Amend rules on Municipal inv. budget THB 366bn municipal spending Mega Projects plan THB 1.7trn (State portion = THB 1.16trn, SOE portion = THB 570bn) Mass Transit 16,458 69,398 127,786 227,370 Airport Link 9,355 - - - Transportation 46,909 82,783 72,666 - Water resources 23,548 44,923 63,567 52,031 Education 2,643 14,159 11,240 - Healthcare 25,030 27,996 26,563 25,905 Housing 26,437 25,753 21,408 13,415 150,380 265,012 323,229 422,204 Total * Amend rules on municipal spending 2009 multi-year commitment budget extending to 2010, 2011, 2012 and 2013 are THB 120bn, THB 50bn, THB 10bn and THB 2bn, respectively 5 State portion of investments Amend rules on municipal spending Include SOE Mega Project portion 10 Distribution of benefits Fiscal Stimulus Package Designed to provide even distribution of benefits Sufficient economy fund Living cost allowance Community health workers Health service stations Community loan 5 measures 6 months Small personal loans Small loan guarantees Free education Mortgages Tax incentives for home buyers Labour repatriation loan Irrigation Rural roads Job training Senior pension Tax measures Agricultural subsidies Tourism industry Food industry Tax measures 1 Supplementary budget 2 Tax measures 3 Small personal loans SME SME loan Export insurance 11 Fiscal discipline Fiscal Stimulus Package Retain fiscal discipline while provide room for more stimulus if needed 2009 borrowing limit (THB mm) Borrowing plan (THB mm) 2009 budget Loan to finance budget deficit 437,940(1) Economic and social development loan 183,500(2) Economic and social development projects (committed) Estimated decrease in 2009 revenue 2009 Supplementary budget 249,500 29,790 132,000 116,700 621,440 Efficient cash management can reduce borrowing requirement 527,990 Remaining borrowing capacity for Fiscal Year 09 93,450 Ratio of public debt to GDP is 42% / Ratio of annual borrowing to total budget is 15% (1) 20% of 2009 budget including supplementary budget of THB 1,935,000mm (including supplementary budget) + 80% of THB 63,676mm loan repayment budgeted (2) 10% of 2009 budget (excluding supplementary budget) 12 Expected outcome Fiscal Stimulus Package Expected impact on GDP growth Impact to GDP 1 Supplementary budget 2 Tax measures 3 New loans 4 Government budget SOEs investment / year Immediate spending of THB 100bn 1.0% Every THB 10bn of tax savings 0.06% / year Every THB 300bn of increase lending 0.2% / year Every THB 25bn of spending over estimated investment plan 0.1% / year Every THB 25bn of government spending 0.1% / year Municipal budget 5 2009 budget Mega Projects 13 Goals of the stimulus package Fiscal Stimulus Package Immediate action as well as laying the foundation for long-term sustainable growth 1 Push forward investment projects 5 Expedite budget disburseme nt 4 ’09 Supplementary Budget 2 GDP Tax measures Increase lending through use of SFIs Increase GDP by at least 1% Minimum GDP growth of 2% in 2009 Unemployment between 2.0-2.5% Create THB 12,900mm in revenue for the State Maintain a disciplined and sustainable budget 3 The government will likely maintain an expansionary fiscal policy through 2010 14