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Thailand this week began rolling out a $14 billion stimulus program to hand out cash to millions of its citizens, a long-awaited plan to turn around years of weakness in Southeast Asia’s second-largest economy. may not be sufficient.
The ruling Thailand Contribution Party has pledged to provide 10,000 baht ($300) in benefits to 45 million people to boost growth that lags behind regional countries due to high levels of household debt, sluggish exports and a weak economy. It is touting it as the centerpiece of an economic plan for the United States. Tourism income.
Since taking office in August last year, the party has struggled to implement the policy due to opposition from some politicians and the central bank, as well as concerns about the cost and financing of the plan.
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To get this on track, new Prime Minister Pethuntarun Shinawatra is introducing the system in stages, with the government estimating that the first phase alone will boost growth by 35 basis points this year.
In the first part, the government will distribute funds to around 14.5 million people, including some of the most vulnerable segments of the population. Initially planned to be distributed through digital wallets, the distribution will now be sent directly to recipients’ bank accounts.
“[Cash transfers]will really benefit the people and help distribute economic opportunities to the people,” Petonturn said at a launch event this week. “This policy will be followed by more economic stimulus measures. The government will continue and promote the digital wallet project.”
Some 36 million Thais are registered for the benefit, but economists say the impact of the benefit will be limited and one-off, and that it will weaken an economy weighed down by structural problems and political instability. They warn that there is little effect on remediation. Thailand’s economy grew 1.9% last year, lagging behind regional peers such as Indonesia, Southeast Asia’s largest economy, which grew 5%.
Thailand suffers from high household debt, which is constraining consumer spending and makes its debt one of the highest in Asia at more than 90% of GDP. The economy has also been hit by weak exports and a slump in tourism since the coronavirus pandemic.
“The digital wallet system will definitely benefit consumption in the short term…” said Luca Castoldi, senior portfolio manager at Rail Intesa Sanpaolo. “This could prove to be just a temporary stimulus rather than a long-term solution to our economic problems.”
Some also question whether the plan will be fully implemented, given the pressure on the Shinawatra family, which has a history of conflict with the military and royalist regimes.
Petonthan is the 38-year-old daughter of influential former Prime Minister Thaksin Shinawatra, who was ousted in a coup in 2006. Mr. Thaksin’s sister, Yingluck Shinawatra, was impeached by Congress in 2015 on suspicion of mismanagement of the U.S. subsidy system, another populist policy.
Economists say a military coup and the rapid replacement of the prime minister by the judiciary have also hurt investor sentiment.
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Former prime minister Sureta Thabisin, who was sacked by the Constitutional Court in August and paved the way for Paetongtarun to take over, has been forced to use digital technology due to backlash and warnings from the national anti-corruption agency over her original plan to finance it through borrowing. The implementation of the wallet program failed. It argued that the plan could violate Thai laws on fiscal discipline.
The Bank of Thailand has also questioned the benefits of the program, calling it a financially reckless initiative. The bank is under pressure from the government to cut interest rates to boost growth, but economists believe the recent strength of the baht could lead to a rate cut this year.
Lavanya Venkateswaran, OCBC’s senior economist for ASEAN, said the economic benefits of the first tranche would wear off quickly, predicting the program could boost GDP by 100 basis points once fully implemented.
“Will the boost in growth continue? Is this the best way to spend money? Will it actually help solve the structural problems facing Thailand’s economy? Those concerns remain,” she said. spoke.
