Stimulate to accumulate: A variety of measures are set to fuel growth in 2016

An ambitious and far-reaching government stimulus package announced in late 2015 is targeting a return to the robust economic growth seen in the years following the Asian financial crisis. The government is encouraging lending across a host of segments and demographics, including small businesses and startups, an agricultural industry beset by falling commodities prices and low-income earners hoping to enter the property market.

The projects aim to boost growth across nearly every sector of the economy, with fiscal and monetary policy remaining accommodative through low central interest rates, rising government spending, soft loans to farmers and small businesses, and a major infrastructure development programme. The government has accelerated budget spending in a bid to boost local demand and reduce export dependency. From September 2015 to January 2016, it allocated BT470bn ($14.1bn) of stimulus measures, according to Porametee Vimolsiri, secretary-general of the National Economic and Social Development Board (NESDB).

Stakeholders expect that the stimulus measures should at minimum keep the economy stable in 2016, while an anticipated surge in new infrastructure projects, and intensifying development of new free zones and industrial clusters, will further support long-term expansion, with private sector participation set to soar on the back of a host of new public-private partnerships (PPPs).


In recent years the Thai economy has faced a host of domestic and external challenges, which brought annual GDP growth down from 7.32% in 2012 to 0.87% in 2014. Despite a heartening recovery in 2015, with GDP growth rising to 2.8%, external and domestic macroeconomic challenges have darkened the outlook for 2016.

Chief among these are weakening demand and falling global commodities prices, led by an economic slowdown in China. Growth in China fell to its lowest level in 25 years in 2015, with government figures clocking total expansion at 6.9%, while western economists estimate growth was actually closer to the 4-6% range, and the Wall Street Journal reports it could slump as low as 4.3%. Although Thailand is less exposed to volatility in China than some of its ASEAN neighbours, the global impact of a Chinese slowdown has seen commodities prices plummet, negatively affecting Thailand’s industrial and agricultural segments.

Exports, which comprise roughly two-thirds of GDP, have fallen, contracting far more in 2015 than in the previous two years on the back of weakening Chinese demand. In January 2016 Reuters reported that exports fell for the 12th consecutive month in December 2015, 8.73% y-o-y, to end the year down 5.78%. This represents the largest decline in exports since floods closed thousands of factories in November 2011, and a much sharper drop than those recorded in 2013 and 2014, which were both less than 0.5% (see analysis).

State Support

The country has simultaneously witnessed a sharp increase in consumer debt, and non-performing loans in both the consumer and corporate sectors are on the rise (see Banking chapter), meaning personal consumption is likely to be subdued in the coming years. With this in mind, the government is hoping the host of new stimulus programmes will kick-start the economy.

Recognising that rising consumer spending and sustained investor confidence are critical for economic recovery, the government has rolled out several programmes aimed at bolstering lending in recent years, while the Bank of Thailand (BOT) moved to cut interest rates twice in 2015, and is unlikely to raise them from current levels of 1.5% in 2016. Lending rates were similarly cut following the 2008-09 global financial crisis, with consumer spending and debt soaring as a result; the Financial Times reports that consumer loans doubled between 2008 and 2014 to reach 80% of GDP.

Early Efforts

Following a military coup in May 2014, the government began rolling out a series of stimulus packages aimed at bolstering investor confidence, supporting GDP growth and maintaining stability. The first came in September 2014, when the government approved stimulus measures worth a combined BT364bn ($11bn) in a bid to combat lagging economic growth. Although deputy prime minister Pridiyathorn Devakula did not specify the exact programmes the government planned to roll out, he told Reuters that the measures would target job creation and infrastructure upgrades, including the repair of schools, hospitals and irrigation systems. The government simultaneously extended tax breaks and subsidies for some types of fuel, as well as public transport.

Of the total, BT129.5bn ($3.9bn) was added to the 2015 budget, while BT147bn ($4.4bn) came from unspent funding from the 2014 fiscal year. An additional BT48bn ($1.4bn) of unused government funds dating back as far as 2005 had also been allocated, according to Pridiyathorn.


In September 2015 the government unveiled its 2016 stimulus programme. Measures worth a combined BT136bn ($4.1bn) include soft loans via village funds, worth BT60bn ($1.8bn), which will boost spending power in rural areas and provide crucial credit access to farmers and low-income rural dwellers, as well as a BT36bn ($1.1bn) fund for soft loans to sub-districts. Another BT40bn ($1.2bn) was allocated for spending on small-scale infrastructure projects, and new corporate incentives were introduced, including a reduction in the corporate income tax rate from 23% to 20% (see Trade & Investment chapter).

The measures also included a new property stimulus package for low-income home buyers, which includes cuts to housing transfer and mortgage fees and generous tax deductions. Under the scheme, the state-owned Government Housing Bank was allocated a one-off BT10bn ($301m) budget to provide low-income earners with housing loans, and first-time buyers are now permitted to deduct 20% of their property’s value from their annual personal income tax for the next five years, provided that the home cost less than BT3m ($90m) and was purchased before the end of the year. Housing transfer and mortgage fees have also been cut to 0.01% of the total purchase price, from 2% and 1%, respectively.

Farm Support

In addition to its 2014 stimulus commitments the government allocated BT40bn ($1.2bn) for one-off payments to farmers to support rice production, after earlier providing BT50bn ($1.5bn) in soft loans for rice farmers following the collapse of a subsidy scheme launched by former prime minister Yingluck Shinawatra.

Under the scheme, the government bought rice from farmers at up to double the market price for three years, in a bid to boost both rural incomes and spending, although the programme collapsed in early 2014 after incurring losses of some $15bn, while much of the government-purchased rice remained unbought in warehouses.

In its 2015 Economic Outlook and Policy Framework report, the Fiscal Policy Office also notes that the Ministry of Finance (MoF) continues to support farmers’ living expenses through policies including reduction of loan interest rates to 3% annually for farmers whose loans do not exceed BT80,000 ($2410) over six months, a BT12.5bn ($376m) soft loan programme for rice farming and value addition in agriculture, and a BT26.8bn ($805m) soft loan scheme to put off paddy selling during harvest season. Farmers pay monthly recurring revenue interest rates for the loans, and agricultural cooperatives pay minimum loan requirement rates, using paddies as collateral.

Rubber farmers are also expected to benefit from an upcoming stimulus programme, with the government announcing in January 2016 that it plans to buy rubber from local producers at premium rates to help cushion them from rapidly falling global markets, with rubber prices hitting a seven-year low by the end of 2015.


Lending growth, particularly to small and medium-sized enterprises (SMEs), is also high on the government’s agenda, with the MoF announcing a number of programmes aimed at supporting small business credit as part of the original stimulus package. The Portfolio Guarantee Scheme provided BT100bn ($3bn) to qualifying SMEs, capping guarantees at BT40m ($1.2bn) per business, and charging a fee of 1.75% of the loan per year.

The Policy Loan Scheme, meanwhile, will channel BT15bn ($452m) to the government-owned SME Bank, which will offer five-year loans to SMEs in need of refinancing. Borrowers will pay 4% interest annually during the first three years of the loan, after which the rate will be adjusted based on commercial lending rates. In addition, the Ministry moved in November 2014 to launch a new venture capital fund for innovative SMEs, which provided BT100m ($3m) through the SME Bank.

More recently, the Government Savings Bank and the Stock Exchange of Thailand announced the launch of a new SME private equity trust fund in January 2016. The fund, which will receive an initial allocation of BT500m ($15.1m) and be capped at BT2bn ($60m), will provide low-interest loans to startups, SMEs that are major suppliers to the public and private sectors, social enterprises, and SMEs which contribute to economic growth.

Long-Term Plan

Despite the anticipated positive impact that these measures will have on growth, questions remain as to the long-term viability of regular multi-billion baht injections into the economy. With this in mind, the government is also moving to stimulate growth in the manufacturing and construction sectors. An estimated BT1.8trn ($54.2bn) in new infrastructure is scheduled for delivery in the coming years, including $5.5bn of light rail projects and power plants, which will be delivered through PPPs. The government is also pushing development of value-added production bases known as super clusters, as well as special economic zones, near the borders of Cambodia and Myanmar, and offering manufacturers a low-cost labour base and tax holidays (see Trade & Investment chapter). If rolled out efficiently and on time, these measures will help sustain the short-term benefits of stimulus packages, bolstering economic recovery in 2016 and beyond.