Thailand: Policy statement reinforces stimulative stance
Policy steer towards pro-growth stimulus
Group Research - Econs, Chua Han Teng13 Sep 2023
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Thailand’s parliament concluded its 2-day debate on the new government’s policy statement on September 12. While the government’s priority of boosting the economy with an aim of at least 5% growth per annum is clear, we think there is a lack of clarity on the operational and fiscal funding details.

The key policy watched by investors is the THB10k digital wallet cash handout to each of the 56 million Thais aged 16 and above. The aim is to promote local economic activities nationwide, as the handout has to be spent within 4kms of where they live within six months. The scheme could be rolled out in 1Q24, and requires significant funding of THB560bn (~3% of GDP), but the financing fine print is yet to be laid out. Other key policies include raising the daily minimum wage to THB400 from the current THB328 – 354 as soon as possible, exempting the visa fee for targeted groups of foreign tourists, and reducing the prices of electricity, diesel, and cooking gas.

We see several economic implications from the government’s stimulative policies. First, we see upside risks to our 2024 growth forecast of 3.8%, especially from the digital wallet cash handout. Private consumption would be boosted, but the growth contribution is dependent on how much is spent vs amount used for debt repayment or savings given high household debt (i.e. the economic multiplier). Second, higher-than-expected growth could spur a reacceleration in core inflation in 2024, adding risks of an extension to the Bank of Thailand’s tightening cycle, and even hikes at a faster pace. Lastly, the big spending plans raise fiscal sustainability concerns. This is especially following the sharp increase in public debt of ~20 percentage points to above 60% of GDP, and increased debt limit to 70% of GDP during the pandemic crisis.

Chua Han Teng, CFA

Economist - Asean
[email protected]

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