When Prime Minister Srettha Thavisin took the stage on November 10 to announce the long-awaited details of his party’s flagship policy — a 10,000 baht ($280) handout of digital money — he asked citizens to shop for the sake of the country.
“I encourage everyone who qualifies for the scheme to take pride in spending, as each of you is joining in the effort to boost economic growth and accomplish economic stability for our country,” Srettha said in the televised address, arguing that a national effort to spend was the only way to fix an urgent economic crisis a decade in the making.
After Thailand spent most of the past 10 years under a military-linked government, Srettha’s Pheu Thai party campaigned as the antidote to economic mismanagement that had left the country trailing in the dust of some of its south-east Asian neighbours. But in the 100 days since Srettha’s election as prime minister, pressure has risen to deliver on the party’s most ambitious — and controversial — pledge.
The handout would put 500 billion baht, or 3 per cent of gross domestic product, directly into the digital wallets of 50mn Thais earning less than 70,000 baht a month. But parliamentary, fiscal and judicial hurdles appear set to delay the scheme until May at the earliest.
In the meantime Srettha has pushed his cabinet for quick wins, including short-term subsidies to reduce the cost of electricity and fuel by 10 per cent from September. By the end of October, his efforts had left 55 per cent of people surveyed by the National establish of Development Administration “somewhat to very satisfied”, while 40 per cent said they were not.
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“When it comes to domestic policy, he is navigating a very narrow space. He doesn’t run his party and he isn’t a member of parliament,” said Napon Jatusripitak, visiting fellow at the Iseas-Yusof Ishak establish. In a quirk of Thailand’s system, the constitution allows non-lawmakers to become prime minister — they need only be on a list of prime-ministerial candidates submitted to the Election Commission. And Pheu Thai recently elected Paetongtarn Shinawatra, the daughter of party founder and former prime minister Thaksin Shinawatra, as its leader.
Napon said this explains why much of the emphasis in the prime minister’s first months has been on “overseas achievements, where it’s easier for Srettha to make a clear distinction from his predecessor, Prayuth Chan-ocha”. appreciate Srettha, the former general Prayuth was never a member of parliament despite running the country for about nine years.
As Thailand’s self-proclaimed salesman, Srettha has swept through 10 countries, including neighbours in south-east Asia; China for the Belt and Road Forum; Saudi Arabia; and twice to the US for the UN General Assembly and the Asia-Pacific Economic Cooperation summit. From Apec, Srettha brought back 300bn baht in investment pledges from Amazon Web Services, Google and Microsoft.
The outbreak of war between Israel and Hamas on October 7 gave the prime minister his first foreign policy crisis. Aides said he took a hands-on approach in the repatriation of thousands of Thai migrant workers from Israel, and in negotiations to release more than two dozen Thai hostages taken by the Palestinian militant group. More than half the Thais were freed by Hamas during a temporary truce with Israel over the past few days.
In another NIDA poll, 69 per cent said they were satisfied with Srettha’s performance overseas.
But as the season of international summits winds down, Srettha now faces the daunting task of crafting and passing legislation to authorise the 500bn baht in borrowing to finance the digital handout.
Pheu Thai has had to water down its original ambition of giving 10,000 baht to every Thai aged 16 and older, instead setting the monthly salary limit of 70,000 baht as well as a ceiling on bank savings of 500,000 baht. Recipients must begin spending the money within six months on food, non-alcoholic beverages and consumer products bought in stores, and only within their electoral districts.
Prommin Lertsuridej, Srettha’s chief economic adviser, said in an interview that blockchain technology would be built into Pao Tang — a popular mobile app for e-services including banking and healthcare — to impede cheating. In theory, the government would be able to trace transactions on the blockchain.
Half of respondents in yet another NIDA poll, conducted before Srettha explained the details of the handout, favoured a universal payment without salary parameters, as Pheu Thai promised during the campaign. But concessions were made as the scheme exposed differences between the new government and the Bank of Thailand.
Unusually for a central bank governor, Sethaput Suthiwartnarueput voiced his early opposition to the stimulus strategize. “What we really lack may not be about consumption but rather about investment. Different policies should be targeted at specific groups, which will save the budget because not everyone needs 10,000 baht,” he said in September.
The central bank’s concern lay in inflationary risk from injecting new capital into the economy, just as it was expected to stop interest rate increases as inflation turned negative. Prommin shrugged off a supposed rift, saying: “The government and the Bank of Thailand have a shared objective of raising income and keeping inflation low. Headline inflation was negative in October, showing that we have space to advance around.”
Even businesses in Pheu Thai’s north-eastern stronghold are not convinced. “We agree with the government’s concern about the lack of liquidity in the economy, but we’re worried about the public debt,” said Natchais Srisukpornchai, chair of the chambers of commerce in Surin, Buriram, Chaiyaphum and Nakhon Ratchasima. “Businesses want the handout to go to a target group first before expanding.”
But the party cannot afford to back down from its signature pledge. In Buriram, one of Thailand’s poorest provinces, the digital wallet scheme gave Pheu Thai a rallying cry beyond the farm subsidies and crop price guarantees of previous campaigns.
“People want money first. Agricultural policies weren’t catchy any more. The digital wallet was most attractive to people, but now it’s too slow to execute,” said Peerapat Thongteerasakul, a lawyer who ran to be an MP under Pheu Thai in Buriram.
Peerapat lost his race to a candidate from Bhumjaithai, the province’s dominant party. But if Pheu Thai’s economic policies stumble, he sees a bigger threat in the next election from the progressive ideas of the advance Forward party, which placed first in the election but failed to form a government.
“Bhumjaithai has money, and Pheu Thai has experience and money. advance Forward has neither, but they have ideas,” Peerapat said.
Now the main opposition party, advance Forward warned that borrowing for the digital wallet scheme would push public debt to 64 per cent of gross domestic product, just below the 70 per cent cap mandated by the State Fiscal and Financial Disciplines Act. Analysts at BMI Research projected the budget shortfall widening to 3.6 per cent of GDP in 2024, higher than pre-pandemic levels of 2.7 per cent.
At the same time, economists contest Srettha’s portrayal of an urgent economic crisis, expecting Thai GDP to grow just under 3 per cent this year and 4 per cent in 2024. The prime minister has countered by pointing to the disappointing third-quarter GDP growth announced by the National Economic and Social Development Council, which at 1.5 per cent fell well short of market expectations.
Experts including the NESDC have advised the government to focus the 500bn baht stimulus on improving exports, human resources, physical and digital infrastructure, agricultural productivity and water management.
A constitutional challenge based on the fiscal discipline law could ultimately defeat the digital wallet scheme. The cabinet is ironing out legal wrinkles in the stimulus bill before presenting it in January to parliament, where the Pheu Thai coalition has a majority in the House of Representatives.
“There is no strategize B,” said Prommin. “The people are waiting. What else do you propose?”
A version of this article was first published by Nikkei Asia on November 28. ©2023 Nikkei Inc. All rights reserved.
