The Bank of Thailand (BoT) remains firm in its opposition to a government plan to give 500 billion baht in cash to almost all its adult citizens to revitalise consumption activity, saying the prudent thing would be to limit assistance to the needy.
With private consumption forecast to expand about 4% this year after a record growth of 7% last year, there is no need to stimulate demand across the board, BoT governor Sethaput Suthiwartnarueput said in an interview on Tuesday.
The so-called digital wallet scheme, which currently promises 10,000 baht ($272) each in cash to 50 million Thai citizens 16 years and older, should only cover the 15 million welfare cardholders, according to Mr Sethaput.
While Mr Sethaput's comments are in line with a view previously articulated by the BoT, the timing of the remarks is bound to rattle the government, relations with which are already frayed over the central bank's monetary policy path and inflation target. Pushing the 500-billion-baht cash program through has not been exactly easy: Prime Minister Srettha Thavisin's administration has faced numerous questions over its funding and the roll out has been delayed multiple times.
Mr Srettha has so far sidestepped opposition to the program and touted it to lift Thailand's economy from years of sluggish growth.
"If you want to do the scheme, it is better to do it in a targeted way and also a smaller way," Mr Sethaput said. "We don't see the need to try to stimulate consumption across the board."
Even as private consumption boomed with a recovery in tourism, vulnerable and lower income households were still reeling from the coronavirus pandemic impact and in need of help, according to the governor. Limiting the digital wallet to welfare cardholders — people below a certain level of income and eligible for various state subsidies and allowances — will be "healthier" from a fiscal standpoint, Mr Sethaput said.
Sethaput: No need trying to stimulate consumption across the board.
The main election pledge of the ruling Pheu Thai party, the digital wallet has been dogged by controversies over the government's shifting stance on how to finance it. After initially proposing to cover about 55 million Thais and financing it through state budget, Mr Srettha's cabinet decided to exclude affluent Thais and fund it through a one-off borrowing.
But potential legal challenges and warnings from the country's anti-graft agency prompted the government to rework the funding options. Mr Srettha has pledged to distribute the cash in the final quarter of this year even though uncertainty remains about how it will be funded.
As the banking regulator, the BoT has advised the government to ensure that the move to borrow 172 billion baht from the Bank for Agriculture and Agricultural Cooperatives (BAAC) to fund the digital wallet does not hurt the lender's safety and liquidity, Mr Sethaput said.
He said there was a fair amount of uncertainty around the digital wallet and for that reason, the BOT’s baseline forecasts for growth for this year and the next at 2.6% and 3%, respectively, do not include impact from the program. Thailand's economic growth will return to its potential of 3% even without the cash handout, he said, signalling that the monetary policy path will not be affected even if the cash handout failed to materialise.
A fresh spell of political turmoil with Mr Srettha and Thaksin Shinawatra, the de facto leader of the ruling Pheu Thai Party, facing legal cases poses significant risks to the digital wallet plan, economists at Citigroup Inc and Nomura Holdings Inc have said. Mr Srettha is at risk of being ousted from power if he is found guilty in an alleged ethical violation case being heard by the Constitutional Court.
