Immense tariffs create uncertainty over subsidy program's future
The Digital Wallet's Unkept Promise
The future of the Thai government's digital wallet scheme's third phase hangs in the balance due to the influence of US tariffs on Thailand's economy.
Finance Minister Pichai Chunhavajira confirms that the 10,000-baht handout program is under consideration, as the government reassesses its priorities in the face of global economic turmoil caused by trade disputes. Thailand has forwarded its proposals to Washington in an attempt to avoid the implementation of a steep 36% tariff on Thai imports, in addition to the existing 10% tariff. The scheduling for negotiations with the US has yet to be determined.
Mr. Pichai mentioned that the committee on economic stimulus measures is gathering data for a reevaluation of its policies, including the third phase of the populist scheme. The first two phases of the cash handout managed to generate only modest economic gains.
Thailand has 157 billion baht remaining to fund the final phase of the scheme, but it requires an additional 27 billion baht for its execution. Under the plan, 2.7 million Thai citizens aged 16 to 20 would receive 10,000 baht each in digital currency to ease their financial burdens and stimulate the economy. Initially, the scheme was anticipated to secure cabinet approval last week, but it has since been postponed.
Mr. Pichai indicated that the government is open to modifying spending within the 2025 budget, if necessary, without waiting for the 2026 fiscal year's expenditure plan to begin on October 1. He expressed confidence that legislators would make the appropriate changes when the budget bill is introduced for its initial reading in the House between May 28 and 30.
"Ultimately, we require a strong medium- and long-term economic strategy. We must review if we will seek additional loans or make debt repayments," said Mr. Pichai.
Mr. Pichai is set to meet with officials from the Export-Import Bank of Thailand (Exim Bank) on Thursday to discuss support measures for exporters affected by the US tariffs.
Economy in the Shadows
People's Party leader Natthapong Ruangpanyawut stated on Wednesday that if the economy in the Northeast, the country's largest region, is not significantly boosted, the third phase of the scheme will have limited or no impact.
Speaking at a party forum in Khon Kaen, Mr. Natthapong highlighted the need for a major push for the Northeast economy. "Even if the government proceeds with the handout, which increases domestic spending, [domestic] production would remain low because the money is being spent on cheaper imports," he said.
He likened the Thai economy to people suffering from "long Covid," adding that the economic situation may worsen further due to intense global trade conflicts. Certain sectors of the economy in the Northeast have shown positive signs, but the region's industrial sector has yet to recover fully. The issue of uneven development in the region also requires attention.
Mr. Natthapong proposed strategic intervention to nurture a "rising star" economy, such as the popular "mutelu" tourism, which is associated with mysticism and lucky charms. He also emphasized the need for extensive efforts to develop and strengthen IT and communication sectors, which currently lag behind.
Editorial: Reevaluating the Digital Wallet Scheme*
Overall, the Thai government's third phase of the digital wallet scheme is currently under review and may undergo changes due to the impact of US tariffs on Thailand's economy. Here's a summary of the current status, its consequences, and potential alterative measures:
- Assessment and Alterations: The third phase of the digital wallet program, which featured the 10,000-baht handout for young people, is being reassessed. This decision is part of a broader economic realignment effort by the Thai government [1][2][3].
- Handout Cancellation: The government has opted to cancel the 10,000-baht handout for approximately 2.7 million young people. The funds, originally allocated at 27 billion baht, will be redirected towards more targeted economic initiatives [3].
- Impacts of US Tariffs: The recent increase in US tariffs on Thai goods has introduced new economic pressures, leading the government to adjust its economic recovery strategies. These tariffs are seen as a significant external factor affecting Thailand's export-driven economy [2][3].
- Exporters' Struggles: The tariffs are impacting exporters, and the government is considering targeted relief measures to help them weather these impacts [2].
- Micro-economic Stimulation Approach: The budget for the cancelled cash handout will be reallocated to fund more targeted, timely economic initiatives. These initiatives will address the effects of US tariff increases by prioritizing production restructuring and offering liquidity support to affected businesses [3].
- Creation of a Tailored Economic Stimulus Package: The government is developing a granular economic stimulus package aimed at countering the effects of US tariffs. This initiative involves input from prominent agencies like the National Economic and Social Development Council (NESDC) and the Bank of Thailand (BoT) [3].
- Flexibility in Stimulus Programs: The government underlines the importance of flexibility in its stimulus programs, suggesting that some initiatives might be delayed or revised based on evolving global economic conditions [2].
The Finance Minister's statement about reassessing the government's priorities implies a review of the digital wallet scheme in the context of the global economic turmoil, given its status as a business-related project in the Thai government's budget. Furthermore, the need for a strong economic strategy, as mentioned by the Finance Minister, suggests the government may consider alternative methods for stimulating the economy, possibly including modifications to the digital wallet scheme.
