BANGKOK (REUTERS) - Thailand's military government on Tuesday approved a new round of economic measures worth 206 billion baht (S$8.12 billion) to help small and medium-sized businesses (SMEs), as the ruling junta seeks to revive flagging economic growth.
The military seized power in May 2014 to end months of political unrest but has struggled to revive Southeast Asia's second-largest economy, with exports and domestic demand stubbornly sluggish.
"It's the prime minister's order to help SMEs facing a business downturn and to create new business operators,"newly-appointed Deputy Prime Minister Somkid Jatusripitak told reporters, referring to General Prayuth Chan-ocha, who changed his cabinet last month in a bid to tackle the economic problems.
A weak economy could undermine support for the generals as frustration with restrictions on political activity simmers, particularly among younger voters and supporters of ousted former prime minister Yingluck Shinawatra.
The measures include 100-billion baht in seven-year soft loans, which will give the government an interest burden of about 20 billion baht during the period, Finance Minister Apisak Tantivorawong told reporters after a cabinet meeting.
The government will set up a 6-billion baht fund to help raise funds for SMEs and provide a 100-billion-baht credit guarantee, he said.
Existing SMEs will see their income tax cut to 10 per cent from 10-15 per cent for two tax years, while start-ups in certain sectors will receive a five-year tax exemption, he added but gave no estimated loss in revenue from the tax breaks.
Small firms are suffering from a credit crunch, falling sales and weak consumption amid high household debt while banks grow more cautious about lending for fears of bad debt.
To help small business is crucial as they account for 37 per cent gross domestic product and employs 11 million people, according to Maybank Kim Eng Securities.
Tuesday's measures would help 60,000 SMEs to continue business and maintain about 240,000 jobs, the Finance Ministry said in a statement.
Tuesday's package follows a stimulus worth 136 billion baht ($3.76 billion), aimed at lifting spending power in rural areas. .
The economy grew 0.4 per cent in April-June from the prior quarter. A deadly bomb in Bangkok last month cast a shadow over tourism, one of the economy's main drivers.
The national planning agency last month cut its 2015 economic growth forecast to 2.7-3.2 per cent from 3.0-4.0 per cent. Economists believe the new target is still too optimistic. Growth last year was 0.9 per cent.