(Recasts after meeting on economy ends)
* Govt begins paying billions of dollars owed to rice
* VAT, corporate, income tax cuts rolled over
* Stalled infrastructure plans to be revived
By Orathai Sriring and Alan Raybould
BANGKOK, May 26 Thailand's new military rulers
are moving fast to tackle economic problems caused by the
absence of a proper government since December and are making it
a priority to pay arrears owed to rice farmers, big supporters
of the government they ousted.
The military seized power on Thursday after nearly seven
months of turmoil that hurt business confidence, halted much
government spending and scared away tourists. The economy shrank
2.1 percent in the first quarter and recession was on the cards.
Former Prime Minister Yingluck Shinawatra dissolved
parliament in December and called an election for February. From
that moment, her caretaker government was unable to initiate new
policies, even as the economy foundered, and found it impossible
to raise funds for the troubled rice scheme.
The military has now torn up the constitution and the
finance ministry has moved quickly to find money for the
farmers, inviting banks to tender early next month to provide 50
billion baht ($1.53 billion) in loans to fund the rice scheme.
"We have seen their intention to help farmers. This is an
urgent issue," said Chaiyarit Anuchitworawong, a senior
vice-president at Bangkok Bank Pcl, Thailand's top
Gothom Arya, a lecturer in human rights studies at Mahidol
University, did not think the urgency was necessarily political,
designed to placate supporters of Yingluck, her Puea Thai Party
and her brother, Thaksin Shinatra, another former premier
deposed by the army in 2006 .
"There are hundreds of thousands of farmers in need of money
and they are owed months of payment, which wasn't possible while
both sides were squabbling," he said.
"The army isn't thinking right now about turning a
pro-Thaksin electorate away from Puea Thai Party or any other
pro-Thaksin party. My view is that they're thinking: Let's solve
one of the most pressing problems in the country first."
BOOST TO RURAL ECONOMY
Whatever the motivation, 40 billion baht will be injected
into the rural economy fairly quickly as the state-run Bank of
Agriculture and Agricultural Cooperatives pays some of the 90
billion baht owed to farmers from its reserves.
The military government plans to pay the remaining 50
billion baht in less than a month, according to comments from
coup leader General Prayuth Chan-ocha.
Air Chief Marshal Prajin Juntong, who is overseeing economic
matters for the junta, told reporters after meeting top civil
servants that the rice payments could add 0.2 percentage point
to economic growth this year.
He said that would be on top of forecast 2 percent growth.
That is the middle of the range forecast by the NESDB planning
agency, which compiles Thailand's GDP figures.
Business leaders are expecting an economic stimulus package
and are relieved that it should now also be possible to get a
state budget ready for the new fiscal year from Oct. 1.
Prajin, who is also chairman of flag carrier Thai Airways
International, said the budget would be on time.
"This should be positive for the economy in the second
half," said Surachai Kositsareewond, an executive vice-president
at Bangchak Petroleum Pcl. "The clearer economic
policies should help boost confidence and the private sector is
ready to adjust."
The new government will roll over a cut in the corporate tax
rate to 20 percent, which lapses in December, and an extension
of the 7 percent value-added tax rate before it reverts to 10
percent in September, Somchai Sajjapong, head of the Finance
Ministry's fiscal policy office, told reporters.
The deposed government had planned to do this but did not
have the authority, leaving businesses up in the air.
The government will also extend cuts to income tax rates
brought in at the end of 2013, Somchai said.
It will go ahead with some projects under a halted 2
trillion baht ($61 billion baht) infrastructure plan, as well as
parts of a 350 billion baht water management project drawn up
after disastrous floods in 2011 but repeatedly delayed.
Somchai said he was confident the economy would grow more
than 2 percent this year and that the ministry was hoping for 3
percent. To reassure financial markets, he said the military
government had no intention of imposing capital controls.
The last military-led government in Thailand brought in
draconian controls in December 2006, at a time when the baht was
soaring. They caused the stock market to plunge 14.8 percent in
a single day.
($1 = 32.5950 Thai baht)
(Additional reporting by Bangkok bureau; Writing by Alan
Raybould; Editing by Simon Webb and Ron Popeski)