Don't just rely on stimulus
The cabinet decision to offer direct cash handouts to the jobless and low-income earners ahead of the New Year festive season is a one-off measure that could boost consumption and stimulate the flagging economy.
But this will be short-lived. Other long-term measures to rescue the urban poor and engage them as part of the overall economic recovery must be adopted.
The Prayut Chan-o-cha government's move to dish out a sum of 12.8 billion baht directly to 5.4 million people, who are either jobless or earn less than 100,000 baht a year, should help the urban poor pay their bills while injecting some vitality into consumption which has cooled off in recent months.
- Commentary: Good, but misguided
Inevitably, critics will question the move of the current regime saying it is is simply following in the same populist footsteps as the previous government it toppled. However, direct cash handouts to households can benefit both low-income people and the economy. It is the type of radical policy supported by progressive economists, such as those in Britain, as a means to respond to a shock to the economy or to remove the threat of deflation.
Under the plan, about 3.1 million people who earn less than 30,000 baht a year will receive 3,00 baht and those who earn more but less than 100,000 baht will get a sum of 1,500 baht. Farmers are not included because the government already promised them a sum of 6.54 billion baht in September to be spent on cash handouts. These funds are yet to be disbursed.
With increased household consumption, the government hopes it will create a multiplier effect that could help keep the economic momentum moving after a slight slowdown seen during the third quarter of the year when gross domestic product (GDP) grew by 3.2% year-on-year against the 3.5% growth in the second quarter, bringing overall nine-month growth to 3.3%.
Growth in the third quarter failed to reach the projected rate of 3.4%. A drop in consumption is one of the key factors that dragged down the projected growth rate. Public consumption in the third quarter contracted by 5.8% year-on-year against +1.5% seen during the second quarter.
Additionally, the slowdown in spending has been ongoing as Thais are going through a period of mourning after the passing of His Majesty King Bhumibol Adulyadej in October. The mourning phase was supposed to be for a month but many companies are undertaking it for at least 100 days, which means they are not likely to return normalcy until the end of January next year.
The government needs to ensure that the cash will be handed out to the right people in a timely manner and that there are no hiccups. Its earlier cash handout policy for farmers has yet to be implemented a few months after being announced.
Policies such as direct cash handouts and tax exemptions that the government applied last year do not bring about long-term benefits for either recipients or the economy as a whole. An adviser to the Commerce Ministry, Nathaporn Chatusripitak, even pointed out that the latest giveaway policy is not an economic stimulus because stimulus measures should include infrastructure development projects and accelerated state expenditure.
The jobless and the urban poor must not be forgotten after this one-off package. Job creation and labour skills training should be included in the government's expenditure plan to stimulate the economy. This is to ensure that they will benefit economically from those stimulus measures.
The country has been suffering from a slowdown in consumption. Even though the cash handout measure will be short-lived, it should help boost the stagnant economy and improve the morale of the urban poor.
Bangkok Post editorial column
These editorials represent Bangkok Post thoughts about current issues and situations.
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