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Help for struggling property markets included in tax package announced by new Thai government

The government, in power for just a month, approved a new tax allowance of up to 300,000 baht for people who buy a new home this year, the extension of a tax allowance of up to 100,000 baht a year for mortgage interest payments and property tax breaks for companies.

The news was welcomed by developers. Developer Supalai SPAL.BK forecast a rise of at least 20% in 2009 revenue, above analysts' forecasts. President Prateep Tangmatitham said that the company planned to spend 2 billion baht on purchasing land this year and would build and sell 10 to 13 residential projects, including condominiums, worth 15 to 20 billion baht in sales.

The Finance Ministry said in a statement that the tax breaks in the property sector would cost the government about 36.5 billion baht in lost revenue.

It has also approved a 115 billion baht supplementary budget to boost spending to help the economy, expected to grow at the lowest rate in a decade this year, with consumer confidence hovering near a seven-year low.

Finance Minister Korn Chatikavanij said the stimulus measures would help boost economic growth to 2% this year, the lowest since 2001, when the economy grew 2.1%, and down from an estimated 4% in 2008.

The Bank of Thailand has cut its policy rate aggressively by a combined 175 basis points to 2% in the past two months to help the economy amid a global slowdown. It has said its monetary policy will remain accommodative.

Central bank Chief Economist Amara Sriphayak is predicting that unemployment could rise to a million this year, or 2.8% of the workforce, if the economy did not grow at all.