BOT urged to launch soft loans

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BOT urged to launch soft loans

Flood impacts

The Finance Ministry is discussing with the Bank of Thailand the possibility of the central bank providing soft, low-interest loans through commercial banks for flood-hit small and |medium-sized enterprises and households, Finance Minister Thirachai Phuvanatnaranubala said yesterday.

"This would be for specific cases with really special reasons, and for both SMEs and individuals. We are discussing the procedures," he said.

The Finance Ministry is considering a tax deduction for individuals who have to repair their homes or cars after the flood disaster, |he said.

The Revenue Department will also consider a higher tax allowance on machinery depreciation, he said. The ministry may also exempt import tariffs on finished products in addition to the one affecting cars.

Tax privileges under the Board of Investment are also on the table as means to compensate flood-hit companies, he said.


BOT Governor Prasarn Trairat­vorakul said the central bank would probably decide whether to contribute to flood relief through soft loans in the next few weeks.

"We have done everything monetary discipline allows [to help flood victims]. Some have asked us to help in ways that, viewed strictly, is on the edge of monetary discipline," Prasarn told reporters at the Thailand Smart Money fair.

Currently, the Bank of Thailand Act BE 2551 does not permit the central bank to engage in soft loans. Before the act came into force, the central bank extended soft loans through commercial banks for businesses in the southernmost provinces of Thailand when the insurgency was severe.


Regarding overall loans in 2011, the BOT governor said growth could reach 17-18 per cent despite the floods late in the year.

"Loan growth is likely to be strong next year but not stronger than this year. It is possible that it will be close to 10 per cent, as others have targeted," Prasarn said

The central bank lowered its estimate on the country's 2012 export growth to 8 per cent mainly because of the struggling US economy and the euro-zone debt crisis.

Next year's economy could be driven mainly by domestic demand, which accounts for more than 50 per cent of Thailand's gross domestic product, Prasarn said. Next year's GDP growth is projected at 4.8 per cent. If the country recovers fully from the floods, that could boost growth, Prasarn said.


Because of the impact on the economy from the floods, the central bank's Monetary Policy Com­mittee cut the policy rate by 25 basis points to 3.25 per cent.

"That does not signal a downward trend for the policy rate. Inflation remains relatively high but has not accelerated, and this allowed the MPC to be accommodative" to help relieve the flood impact, Prasarn said.

The next MPC meeting is expected to review whether monetary policy needs to ease further to bolster flood recovery, he said.

The Finance Ministry has targeted bank loans of Bt325 billion for post-flood recovery and loans by state banks were approved earlier, Thirachai said.

The Nation December 17, 2011