BANGKOK: A regional think-tank believes the impact of the much-touted digital wallet policy would depend mostly on how it's funded, especially as growth is expected to be highly dependent on domestic demand.
On Monday, the Asean+3 Macroeconomic Research Office (AMRO) published its annual flagship report, the Asean+3 Regional Economic Outlook 2024. The report found that the main growth in Asean+3 would be driven by domestic demand from an increase in household incomes and recovering investments.
AMRO is expecting to see a turnaround in exports from a global chips up-cycle and the recovery of tourism after the Covid-19 pandemic.
Allen Ng, group head and principal economist of AMRO, said the key of the digital wallet scheme that was used as the Pheu Thai party’s main policy while campaigning in the latest elections is really on the nature of how it will be financed. If it involves shifting expenditures away from other forms of spending, then the potential impact to the economy will be limited.
“Suppose the spending shifts away from education or infrastructure, this would have a negative impact on the multiplier and the positive impact from the cash transfer [digital wallet] might be muted in that sense.”
In early March the government announced that the digital wallet scheme would reach recipients by the fourth quarter of 2024 and the Finance Ministry and the Budget Bureau will be finalizing the details of the scheme for submission to the next committee meeting on Wednesday.
Asean+3 think-tank eyes viability of digital wallet scheme
On Tuesday, a well-informed source told reporters at the Parliament Complex that the government has cancelled its controversial plan to take out an off-budget loan of 500 billion baht to finance the scheme. Instead, it would use money from the budgets of two fiscal years to finance the handouts.
Also on Tuesday, Prime Minister Srettha Thavisin told Reuters that the Bank of Thailand should lower interest rates by the end of this week to help the government’s efforts to revitalize Thailand’s efforts to become the second-biggest economy in Asean.
Ng said: “What is really important is that for us to appreciate that the consideration for the change in interest rate in Thailand will be premised upon the assessment of three key things: the nature of inflation, the risk to growth, and for Thailand, specifically on financial stability, as well as the impact of financial stability.”
He explained that the first two aspects have evolved a bit compared with 2023; growth has been below expectation and inflation has been surprisingly on the downside, but the third factor – on financial stability and household indebtedness – continues to be quite high.
Weighing these few factors, Ng is positive that there is a case for the central bank to relook at the assessment carefully.
“I think for most of the analysts that they're actually looking for, they're looking at the consensus of perhaps a movement in April itself for the central bank.” - The Nation/ANN
