Secretary: Scheme tool for stimulus

Secretary: Scheme tool for stimulus

Digital wallet urged to avoid crisis

A woman holds a placard with a message supporting the government's 10,000-baht digital wallet scheme. (Photo: Somchai Poomlard)
A woman holds a placard with a message supporting the government's 10,000-baht digital wallet scheme. (Photo: Somchai Poomlard)

Thailand needs to inject stimulus money into the economy and the digital wallet scheme is one tool to accomplish this goal, says finance permanent secretary Lavaron Sangsnit.

"Today we need to use the remaining fiscal space to prevent future economic crises. If we allow the Thai economy to grow steadily at a rate of 2%, the purchasing power of low-income earners will be affected," he said.

"We need to inject money into the economy. The digital wallet scheme can do this, helping to spur the economy. From a fiscal perspective, accumulating policy space in normal circumstances is advisable. But Thailand needs to use this space now to prevent future crises and keep the economy from sinking deeper.

"If the economy is sluggish, it will dampen GDP growth, tax revenues will not meet targets, and problems will persist. Instead of holding money, we should use the available money to prevent problems from escalating further, helping the economy recover. If we do nothing, the economy may only grow by 1.5%."

Mr Lavaron said the current fiscal space, which is at 7% of GDP, may be insufficient in the event of a real economic crisis.

He said the funding sources for the digital wallet scheme will comprise not only deficit borrowing of 150 billion baht in fiscal 2025, but also budget management in fiscal 2024 and 2025.

For fiscal 2024, which ends in September, not all of the expenditure budget is expected to be spent, meaning some leftover budget can be allocated to the digital wallet project, said Mr Lavaron.

A source who requested anonymity said the government originally set the expenditure budget for fiscal 2025 at 3.6 trillion baht, with additional borrowing to cover the deficit of 713 billion baht.

If the deficit is increased by another 150 billion baht, borrowing would be required to cover the deficit, reaching as high as 860 billion baht, the source said.

Nonarit Bisonyabut, senior economic researcher at Thailand Development Research Institute, said including the digital wallet project in the budget ensures transparent scrutiny from the House of Representatives.

"The scale of this project should be appropriate for the economic situation. Thailand's potential growth level is 3.6% of GDP, while the post-pandemic economic expansion in Thailand has averaged 3%. This means GDP has lagged by 0.6 percentage points," said Mr Nonarit.

"GDP is estimated at 17 trillion baht, of which 0.6 percentage points would total 100 billion baht. Therefore, if the digital wallet project were implemented with a budget of 100-200 billion baht, it would likely be appropriate for the current situation."

Injecting an excessive amount of money would unnecessarily stimulate inflation, leading to a hike in the prices of goods, while expanding the role of the government in the economy excessively would diminish the role of the private sector, which plays a crucial role in driving the country's economy, he said.

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