Thai PM sticks by signature stimulus plan amid calls for scale-down

Pheu Thai’s Srettha Thavisin gestures after Thailand’s parliament voted in favor of his prime ministerial candidacy, in Bangkok Aug 22, 2023. REUTERS/Athit Perawongmetha/File photo

BANGKOK  -Thailand’s prime minister stuck largely to his government’s signature stimulus policy on Friday in the face of mounting criticism, seeking to allay concerns about inflation and a possible adverse fiscal impact on Southeast Asia’s second-largest economy.

After a review of his controversial 560 billion baht ($15.66 billion) “digital wallet” policy amid calls for it to be scaled down, premier Srettha Thavisin reduced the size of the package to 500 billion baht.

READ: Thailand to inject $15.2B into economy through digital wallet plan – PM

The funds will be split between 50 million Thais, excluding only high-earners from a scheme aimed at stimulating a sluggish economy.

“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,” he told a press conference.

The government had been expected to make a bigger reduction in the scope of the project, after warnings from economists and some former central bankers that it could be fiscally problematic and further stoke inflation.

The scheme’s value is equivalent to about 3 percent of gross domestic product (GDP).

The government will submit a bill to parliament to borrow 500 billion baht to finance the scheme, which will see payments of 10,000 baht ($279) to most Thais to spend in their localities within six months, starting in May 2024, Srettha said.

The government will adhere to fiscal discipline and use the state budget to pay back loans over the next four years while keeping public debt within the set limit, he said, adding more projects will follow that will help the economy grow an average 5 percent over the next four years.

Srettha, a real estate tycoon thrust into politics earlier this year, has been in power for two months and is pursuing policies to cut living costs, control household debt and to jumpstart the economy through tourism, a key driver of growth, while exports struggle amid weak global demand.

Srettha said inflation was already low and the plan should not have a big impact on consumer prices.

The economy grew just 1.8 percent year-on-year in the second quarter, sharply slowing from the previous quarter, as weak exports and investment undercut a recovery in tourism.

READ: Thailand’s economy on recovery path as tourism rises

Last month, central bank Governor Sethaput Suthiwartnarueput said the bank’s growth forecast of 4.4 percent in 2024 would be lowered if the stimulus plan was reduced.

The finance ministry predicts growth of 3.2 percent in 2024, excluding the effect of the scheme.

($1 = 35.76 baht)