September 6, 2023
BANGKOK – Academics at the Thailand Development Research Institute (TDRI) have analysed the policy of providing the digital cash handout of 10,000 baht, a total of some 560 billion baht, and suggest it may not significantly stimulate the economy.
They believe that this amount will probably circulate as a one-off thus failing to boost the Gross Domestic Product (GDP) because a considerable amount of money might end up in the hands of those who do not need to spend it immediately.
According to Dr Somchai Jitsuchon, the director of inclusive development at the TDRI, the current situation in Thailand does not necessitate such a policy to stimulate the economy, as other sectors, such as tourism, are performing satisfactorily. While the export sector may show negative numbers, it aligns with the global economic slowdown and still brings an adequate amount of money into the country.
He noted that the policies of different political parties have been both popular and unpopular. Popular policies often seek public approval, but may not effectively strengthen the economy. During the Covid-19 crisis, many countries injected money into their economies by distributing cash handouts. However, Thailand is not currently facing any such crisis.
Dr Somchai views the notion that injecting 560 billion baht, about 3% of the GDP, into the Thai economy could lead to at least 3% economic growth, as oversimplified. This policy involves handing out digital cash without specifying the recipients, meaning that those who do not urgently need to spend it might not utilise this money, or may allocate it as part of their existing spending plans, thus failing to generate a significant circulation of money.
For example, if someone has already budgeted 10,000 baht to purchase a television, they might not use the digital cash for this purpose and instead save it, which would not contribute to increased economic activity. Generally, upfront cash distribution policies tend to have low multipliers as the money might end up in the hands of middle and upper-income individuals who do not urgently need to spend it.
Dr Somchai also confirmed that even if this policy were to lead to 3% economic growth next year, it would be unlikely to cause significant inflation when combined with other economic factors. The origin of the funds must also be considered. If the entire amount comes from borrowing, it would lead to a 3% increase in Thailand’s public debt, which might not be justified. This policy could serve as a way to use future funds for short-term stimulus rather than fostering production, exports, or tourism.
However, several factors should still be monitored. If Thailand genuinely faces inflation next year due to economic stimulus measures, minimum wage increases may be involved. Even though the timeline for such increases is clear, businesses may still prepare to adjust their product and service prices accordingly. The government should efficiently implement policies in response to these developments.