The Thai Bankers Association assesses the impact of the COVID-19 pandemic, estimating a net financial loss of approximately 1.3 trillion baht, or about 7.7% of GDP. Particularly, the tourism sector has seen a revenue loss of up to 1.1 trillion baht, which could lead the Thai economy to contract deeply, similar to 1997, and possibly even more severely if the outbreak cannot be controlled by the second quarter of this year. This would exacerbate the financial impact, potentially making it worse than the 1997 financial crisis.

 

         

           Mr. Pridi Daochai, President of the Thai Bankers Association stated that the Bank of Thailand (BoT), the Ministry of Finance, and financial institutions have implemented additional measures to assist SMEs and maintain the stability of the private debt market to mitigate the economic impact of COVID-19. On April 7, 2020, the Cabinet approved a royal decree granting the BoT the authority to issue soft loans to support businesses, along with measures to stabilize the financial sector and a decree for borrowing to provide economic relief. Collectively, these are part of the third phase of relief measures amounting to 1.9 trillion baht, which is deemed both 'important' and 'extremely necessary.'

        The COVID-19 crisis and the 1997 crisis differ significantly in that this time, the government has implemented 'rapid' and 'large-scale' assistance measures to prevent a severe downturn. The first priority is to manage public health to curb the spread of the virus and care for patients on a broader scale, along with addressing the livelihoods of the people. Both aspects will see fiscal measures as the main mechanism, making the approval process for an additional 1 trillion baht borrowing decree a legal necessity to draw resources from various government agencies to meet these objectives, especially after the original budget has been fully allocated.

        On another front, maintaining the stability of the financial market is also crucial  as the Thai financial market is now more interconnected with international markets than it was in 1997. This means that panic, whether domestic or international, can significantly affect interest rates and yields in the financial market, impacting the stability of financial institutions and the financial status of businesses and households.

        Ensuring economic and financial market stability is a responsibility of monetary measures, which should prioritize plugging leaks and restoring market confidence.  Therefore, the 900 billion baht measures this time must focus on establishing a fund to support the private debt market, which constitutes about 22% of GDP. This will assist businesses needing to raise funds to repay existing debts and enhance liquidity, as well as help institutional and retail investors, acknowledging that recently, retail depositors have increasingly turned to invest in debt instruments.

        Additionally, this assistance includes measures to support businesses, especially SMEs, which account for over 99% of all businesses and employ over 85% of the workforce, or more than 13 million people, through additional soft loans, alongside automatic debt moratoriums on both principal and interest. All of this is expected to help sustain business operations, preserve jobs, and maintain some aspects of the business supply chain while everyone unites at home to stop the virus for the nation.

“I am confident that the various financial and fiscal measures taken by the government will likely keep the contraction of the Thai economy this year within a limited scope and will not escalate into a larger crisis. Ultimately, the situation will depend on when the COVID-19 outbreak ends, but I believe that if necessary, the Thai authorities still have ample resources to support the economy through this crisis.”