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The government will increase the mid-year budget for fiscal 2009 by Bt100 billion, to help drive economic growth as it bids to minimise a potential surge in unemployment resulting from the world economic slowdown.

In addition, it will extend the tax incentives granted to the property sector by another year, from March 2009 to March 2010.

The Labour Ministry said it would also consider lowering employer and employee contributions to provident funds as a means of easing financial burdens during the tough times ahead.

Finance Minister Suchart Thadathamrongvech yesterday said that the mid-year budget proposal had been endorsed by Prime Minister Somchai Wongsawat and Deputy Prime Minister Olarn Chaipravat.

They agreed that more public spending was needed to shore up a sagging economy hit hard by the global financial crisis, in which currencies have also become highly volatile.

Previously, the government set expenditure at Bt1.835 trillion for fiscal 2009 starting October 1, 2008, against revenue projected at Bt1.585 trillion.

 This implied a budget deficit equivalent to 2.5 per cent of gross domestic product (GDP).

Suchart said the budget deficit would increase to 3.5 per cent of GDP, or an additional Bt100 billion.

The increase in public spending is aimed at helping lower-income groups and preparing new skills for those expected to be laid off by private firms, due to the looming recession.

As private firms are planning to slow or cut their investment, the government needs to step in to invest more to maintain economic-growth momentum, he said.

The additional spending will be used to shore up farm prices and create jobs in the tourism sector and other service businesses, Suchart said.

He said government spending on mega-infrastructure projects would take time before the money was actually injected into the economy but that other job-creation projects would yield faster results.

The government will shortly seek parliamentary approval for the mid-year spending hike.

Suchart said there was room for the government to spend more, as public debt was quite low, hovering at about 38 per cent of GDP.

If GDP growth were to fall one percentage point, it would cause a loss of 400,000 jobs, said Olarn, adding that if nothing were done, next year's growth could decelerate to 3 per cent. If so, 800,000 people could be unemployed as a result.

Meanwhile, the prime minister said the government might increase village funds from the current Bt1 million to between Bt1.5 million and Bt2 million per village.

The Federation of Thai Industries earlier said 1 million jobs in manufacturing sectors could be lost next year if export orders were sharply reduced by the global recession.