Thailand’s digital wallet scheme could take a decade to pay off, economists warn

The government's digital wallet scheme will most likely help Thailand's GDP reach 6 per cent next year, but the effect will be short-lived and saddle the country with public debt.

Nongluck Ajanapanya

Nongluck Ajanapanya

The Nation


EIC chief economist and chief strategy officer Somprawin Manprasert said that a massive stimulus plan, such as the digital wallet scheme, could help boost Thailand's GDP growth to more than 5% in 2024. PHOTO: THE NATION

September 15, 2023

BANGKOK The government’s digital wallet scheme will most likely help Thailand’s GDP reach 6% next year, but the effect will be short-lived and will saddle the country with a massive amount of public debt for nearly a decade, Siam Commercial Bank’s Economic Intelligence Centre (EIC) warned on Wednesday.

The warning was made as the EIC released its third-quarter revised report on Thailand’s economic growth outlook for the year.

EIC chief economist and chief strategy officer Somprawin Manprasert said that a massive stimulus plan, such as the digital wallet scheme, could help boost Thailand’s GDP growth to more than 5% in 2024.

However, temporary growth must be balanced against longer-term fiscal burdens, Somprawin said.

Furthermore, he noted that such short-term but massive government spending could jeopardise fiscal sustainability by hastening Thailand’s public debt path to breach the ceiling of 70% of GDP two years early.

This could reduce the fiscal space available to provide a cushion for future uncertainties and make maintaining overall fiscal stability more difficult.

Somprawin noted that there is no right or wrong answer when it comes to government stimulus measures. However, it is the government’s responsibility to investigate and adapt practical solutions for Thailand’s economic growth with extreme caution.

When asked whether the government should implement the digital wallet programme, he suggested that the government, if possible, should target the users who needed it the most so that the scheme did not burden its fiscal balance and the country’s public debt.

However, if the government insists on transferring 10,000 baht into the digital wallets of all Thais aged 16 and over, about 56 million people, the government should come out with a precise budget allocation process as well as long-term structural reform that encourages economic engines other than tourism to flourish, he added.

“Rather than a massive stimulus scheme, there is an alternative to assist the country by seeking new growth engines to enhance our economic potential amid remaining economic scars from the Covid-19 pandemic, as well as challenging environments from global value-chain reallocation and climate change,” Somprawin said.

The EIC’s latest outlook proposes a set of long-term economic policies that should prioritise Thailand’s competitiveness and sustainable growth.

Policies should strengthen Thailand’s competitiveness at both the domestic and international levels, as well as broaden economic opportunities. To that end, the government can encourage fair competition in order to improve the effectiveness of the Trade Competition Act and assist Thailand in joining the Organisation for Economic Cooperation and Development.

“As an OECD member, Thailand could benefit from expansive export markets while strengthening its footing in the global supply chain,” the EIC report said.

Second, policies should promote long-term economic growth through tax policy restructuring in order to reduce inequality by avoiding tax policies that may distort business or household decision-making.

The EIC also revised down the country’s growth rate this year to 3.1% from its previous estimate of 3.9% due to much lower-than-expected output in the second quarter and continued export contraction.

The EIC forecasts that Thailand’s economy will grow by 3.5% in 2024, with a 37.7 million increase in foreign tourists.

Furthermore, private investment is expected to increase in line with Thailand’s Board of Investment’s improved trend of green-lighting investment.

The EIC expects Thai exports to regain momentum in 2024, providing a boost to overall growth.

Headline inflation is expected to rise in the fourth quarter, but should remain within the target range of 1.7% in 2023 and 2% in 2024, due to higher energy and food prices.

Core inflation is projected to remain elevated at 1.4% in 2023 and 1.5% in 2024.

The EIC anticipates another policy rate hike in September to 2.5% as the Thai economy continues to recover and higher energy and food prices increase the risk of inflation.

The real interest rate should return to a positive trajectory, which will support Thailand’s economic and financial stability in the long run by preventing the accumulation of financial imbalances during a prolonged period of low interest rates.

Looking ahead, the Thai economy will face some significant challenges. Aside from new government policies, the country must deal with China’s slowing economy, high public debt and severe drought.

The EIC advised the new government to lay out a plan to strengthen all Thai sectors, eliminate redundant regulations, and spend cautiously.

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