The Ministry of Finance has reiterated that the government’s flagship digital wallet scheme is not only intended to offer economic relief to vulnerable groups, but also aims to stimulate the economy.
The project requires sufficient funding and participation from a significant number of people to kick-start economic activity, said Paopoom Rojanasakul, secretary to the finance minister.
He was responding to a letter sent by the Bank of Thailand, following a request from the government to provide feedback on the 500-billion-baht programme.
Central bank officials told a press conference earlier on Wednesday that they had no objection to stimulus but wanted it to be targeted at the poor.
The digital wallet programme, approved by the cabinet on Tuesday, would give 10,000 baht to each of 50 million Thais to spend in their communities over a six-month period. Delayed twice already, it is now expected to start in the fourth quarter of this year.
The central bank letter suggested that the cabinet reconsider the scheme, noting stimulus might be unnecessary because current consumption is satisfactory.
However, Mr Paopoom said current consumption levels do not reflect the true economic picture.
“We cannot say the country’s purchasing power is robust based on manufacturing figures,” he said.
“Thailand’s Manufacturing Production Index (MPI) has been negative for 16 months. We’ve never experienced such a prolonged negative trend. If the MPI remains negative for another month, it will be the longest negative streak in Thailand’s history. In addition, the country’s capacity utilisation is low, at just 50%.”
The central bank letter reiterated its view that the country’s economic problems are structural and any stimulus would provide only a temporary uptick. Mr Paopoom said he considers this view short-sighted.
He said the digital wallet scheme is meant to stimulate purchasing power, linking it to new investment and job creation.
In addition, the government has supplementary measures to promote long-term structural adjustments, he said.
“You can’t talk about restructuring the economy when the current economy is barely recovering. If we don’t jump-start the economy first, how can we restructure it?” he asked rhetorically.
“The digital wallet project isn’t only about providing relief to vulnerable groups, as suggested by the Bank of Thailand, but is also about stimulating the economy,” he said.
“To achieve this, a sufficient amount of money and participants is needed to kick-start economic activity.”
In the first year after its introduction, the handout programme is forecast to increase the country’s gross domestic product by 1.2 to 1.8 percentage points, said Mr Paopoom.
The Bank of Thailand expects the economy to expand by 2.6% this year, after disappointing growth of just 1.9% last year.
Mr Paopoom also addressed the charge that the project favours big businesses, such as convenience stores and fast-food chains. This view is incomplete, he said, since convenience stores spend money to purchase the goods they sell. The more they sell, the better off the economy will be.
He also said he believes the digital wallet will provide enough incentive for small businesses to participate, as the 500 billion baht must be spent in six months within the district where the recipient resides.
The government has also insisted the digital wallet will not negatively affect public finances.
The programme is to have three sources of funding: 152.7 billion baht from the fiscal 2025 budget; 175 billion from the reallocation of fiscal 2024 budget funds; and 172.3 billion to be borrowed from the Bank for Agriculture and Agricultural Cooperatives (BAAC).
The government on Tuesday agreed to ask the Council of State, its legal arm, to interpret whether the BAAC can legitimately allow the government to borrow 172.3 billion baht to partially finance the handout.