On Friday, Thailand’s Prime Minister Srettha Thavisin defended his government’s controversial multibillion-dollar stimulus plan, waving away concerns that the project could be an economic cure worse than the disease.
The 560 billion baht ($15.66 billion) “digital wallet” policy, which was among his Pheu Thai Party’s promises at the May 14 election, is designed to deliver a jolt of life to the Thai economy, which has yet fully to recover from the downturn of the COVID-19 pandemic.
In a press conference yesterday, Srettha announced that his government will submit a bill to parliament seeking to borrow the money to finance the scheme, which will disperse payments of 10,000 baht ($279) to all but the highest earning Thais. The cash will be dispersed digitally from May 2024, which recipients will then have six months to spend in their localities, Srettha said.
The cash handout will only be eligible to those earning less than 70,000 baht per month and hold less than 500,000 baht in savings accounts.
The bill, the centerpiece of Srettha’s goal of raising economic growth to 5 percent for the next five years, will need to surmount a number of obstacles before it becomes law. The main one is the concerns raised by parliamentarians and economists, including former central bankers, about the scale of the debt required and their fears that the stimulus plan will sharply increase inflationary pressures in the Thai economy. The government has already conducted a review of the plan, which saw the size of the stimulus, which is equivalent to around 3 percent of Thailand’s GDP, trimmed from 560 billion to 500 billion baht (13.8 billion). But many critics had hoped for a sharper reduction in the plan.
During Friday’s press conference, the Thai prime minister downplayed these worries and argued that the “digital wallet” would benefit the economy as a whole.
“This is not to help the poor, but it is to inject money into the economy… so the people become a partner with the government to revive the economy while maintaining fiscal discipline,” Srettha told a press conference, Reuters reported.
As The Diplomat’s James Guild wrote of the scheme back in September, it is an attempt to stimulate household consumption in order to counter the sluggish post-COVID-19 recovery of exports, including tourism, long the mainstay of the Thai economy. The problem, Guild wrote, is that consumer spending in Thailand is constrained by very high levels of household debt. The “digital wallet” is intended to artificially make up for this shortfall by putting money directly in the pockets of the Thai public.
As he noted, the resort to stimulus spending, while consistent with the populist economics of the Pheu Thai Party and its spiritual leader Thaksin Shinawatra, marks a break Thailand’s historic allergy to large deficits. “If this focus on consumption rather than exports were to become an enduring feature of the Thai economy,” Guild wrote, “it would be a major structural shift.”
Leaving aside the technicalities of implementation – of how the government intends to prevent recipients from using the stimulus money to pay off existing debts – the bill is likely to face a rocky passage.
As Veera Prateepchaikul of the Bangkok Post wrote today, the challenge for the Thai Finance Ministry, which Srettha also heads, that is how to justify the urgency of the parliamentary bill, which “will have to be vetted by the Council of State, approved by cabinet, and pass the scrutiny of parliament.” While the government of Prime Minister Prayut Chan-o-cha was granted hundreds of billions of baht in stimulus and emergency spending during the COVID-19 pandemic, it is far from clear that the situation is as urgent now.
As Veera noted, “procuring 500 billion baht to fund the digital wallet scheme, widely seen as a populist policy to curry the favor of voters, can hardly be seen in the same urgent terms as in the end it will be the taxpayers who will have to shoulder the burden.”