Rising political uncertainty poses significant risks to Prime Minister Srettha Thavisin’s plan for a 500-billion-baht digital wallet handout to stimulate the economy, say analysts at Citigroup and Nomura Holdings.
New legal cases against both Mr Srettha and former prime minister Thaksin Shinawatra suggest that Thailand is facing a fresh bout of political unrest that could potentially put some economic policies on the back-burner, Citigroup economist Nalin Chutchotitham wrote in a note this week.
The bank’s base-case scenario assumes no implementation of the digital wallet scheme for now, she said.
The handout of 10,000 baht to about 50 million people has already been delayed twice because of uncertainty about how it will be funded. The Pheu Thai government now says it will begin in the fourth quarter of this year.
Both Nomura and Citigroup see the Srettha administration facing challenges to funding the handout. A plan to pass a 122-billion-baht supplementary budget to partly finance the cash stimulus faces uncertainty in parliament as some lawmakers remain lukewarm to the idea, Ms Nalin said.
The digital wallet is the centerpiece of Mr Srettha’s strategy to lift the economy out of a decade-long, sub-2% economic growth.
“We see significant uncertainty around whether the supplementary budget bill will be passed, not only because of time constraints” but more importantly, that recent developments have significantly raised political risk, Nomura economists Charnon Boonnuch, Euben Paracuelles and Nathan Sribalasundaram wrote in a note on Friday.
A new phase of political turbulence began after the Constitutional Court last week decided to scrutinise whether Mr Srettha breached ethics by appointing a cabinet minister with a criminal record. Prosecutors this week decided to indict Thaksin, the de facto leader of the Pheu Thai party, on royal insult charges stemming from comments he made in 2015.
There’s a risk that Mr Srettha could be removed from his post and the cabinet dissolved as a result, with coalition partners forced to renegotiate terms of their alliance, creating a degree of political uncertainty, according to Citigroup.
“While the legal cases are still unfolding and the political situation remains in flux, there are risks that some economic measures could be put on the back-burner,” Citigroup said.
The bank has lowered its base-case budget deficit to 3.2% of gross domestic product in fiscal 2024 from a prior estimate of 3.5%. It also revised down the fiscal gap outlook for next year to 3.7% from 4.1%.