The Thai Prime Minister has announced a plan to give 10,000 baht (US$275) to every Thai citizen over the age of 16, but providing cash handouts to citizens, may not effectively address the country’s underlying socioeconomic issues.
- The Thai government’s digital wallet stimulus scheme, providing cash handouts to citizens, may not effectively address the country’s underlying socioeconomic issues.
- The targeting errors of the existing state welfare card program raise concerns about the effectiveness of large-scale cash transfers in reaching those most in need.
- Instead of focusing on consumption spending as a solution, Thailand should prioritize reinforcing global value chains and creating a favorable investment climate to promote sustainable economic growth.
Digital Cash Handout Scheme
Thai Prime Minister Srettha Thavisin has promised 10,000 baht (US$275) to every Thai citizen over the age of 16, a form of stimulus designed to inject life into the economy after it was battered by the COVID-19 pandemic.
The government hopes that this cash handout will boost the economy by over 2 trillion Thai baht. However, there are concerns about whether this scheme can address the country’s socioeconomic issues, such as poverty, income inequality, and a deteriorating education system.
Recipients can use the one-off digital cash handout at local businesses within a four kilometre radius of the recipient’s registered address. However, there are concerns about the targeting errors of a previous cash transfer program and the potential negative impact on the fiscal multiplier.
Economic Challenges and Obstacles
But it is still unclear whether the digital wallet scheme can solve the socioeconomic issues Thailand is facing. Poverty was rising in Thailand even before the pandemic despite mild economic growth, with the country ‘caught in a middle income trap of its own creation’ after the end of the rapid growth of the 20th century.
The Thai economy faces several unique challenges, including persistent income inequality, an aging population, air pollution and a deteriorating education system. This is not to mention the uneven impacts of the COVID-19 pandemic on informal workers and children, especially those from low-income families.Wannaphong Durongkaveroj, Ramkhamhaeng University
Concerns and Alternatives
It is unwise to focus on economic growth through consumption spending as a magic bullet for complex socioeconomic problems. Dozens of high-profile economists, including two former national bank chiefs, have come out against the stimulus scheme.
The ability to deliver economic growth is a key performance indicator of any new government. This digital wallet scheme seems poised to temporarily increase the size of Thailand’s economy at the expense of other economic and social issues central to Thailand’s sustainable and resilient economic development. It is a race to nowhere.Wannaphong Durongkaveroj, Assistant Professor of Economics at Ramkhamhaeng University
A more sensible policy alternative to promote short-run economic growth would be to reinforce global value chains and generate a favourable investment climate for foreign direct investment into areas where Thailand has comparative advantage.
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