Investors responded favorably Wednesday to the Thai cabinet's approval of a new 1.2 billion dollar economic stimulus package, driving share prices higher in morning trade.
The Stock Exchange of Thailand (SET) posted gains across the board by mid-session and the beleaguered Thai baht rose slightly to 43.68-73 against the greenback, dealers said.
The SET index closed the session up 3.83 points or 1.4 percent to 275.67.
Analysts attributed the improved sentiment to the cabinet's decision Tuesday to give the green light to the spending scheme, which is expected to boost competitiveness and strengthen Thailand's fragile economic recovery.
In its last major policy initiative before its term ends this month, the ruling coalition approved the wide-ranging package of tariff reductions, funds for poverty alleviation, and a lending program for smaller enterprises.
Among the products whose tariffs will be slashed are computers and petrochemical components, moves that will help stimulate economic growth in 2001, Finance Minister Tarrin Nimmanhaeminda said.
The import tax reductions should help make Thai chemical companies and electronics firms more competitive regionally.
The Bank of Thailand recently clipped its gross domestic product (GDP) forecast for 2000 to 4.5-5.0 percent from 4.5-5.5 percent, while the estimate for 2001 was amended to 4.0-5.5 percent from 4.0-6.0 percent.
The package also includes measures to assist the ailing agriculture sector by injecting two billion baht (45 million dollars) of capital into the country's agricultural bank, Tarrin said.
The minister rejected charges that the stimulus package was merely a form of vote-buying ahead of lower house elections which are scheduled to be held in December or January.
"One should not look at it this way ... We know that the economy is recovering, so it is necessary to keep the momentum going," he said.
However, analysts warned the stimulus package will add to Thailand's deficit spending and potentially increase the size of the government's debt.
Reduced tariffs will also deprive the government of two billion baht (45 million dollars) per year in revenues.
Thailand will this year post its largest balance of payments deficit in history, a shortfall of 2.8 billion dollars, the Bank of Thailand (BoT) said Monday.
The deficit in the balance of payments for 2000 was a result of government stimulus spending and high foreign loan repayments by non-bank sectors and the central bank, the BoT said in a report -- BANGKOK (AFP)
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