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Thailand has initiated a $14bn stimulus program to distribute cash to millions of citizens this week. However, the much-anticipated scheme might not be sufficient to reverse years of slow growth in southeast Asia’s second-largest economy.
The ruling Pheu Thai party has committed to providing a 10,000 baht ($300) handout to 45 million people as part of its economic plan to enhance growth. Despite facing obstacles from certain politicians, the central bank, and concerns about the program’s cost and financing, the party has struggled to implement the policy since assuming office in August of last year.
New Prime Minister Paetongtarn Shinawatra is introducing the program in phases, with the initial phase expected to increase growth by 35 basis points this year. The government will distribute funds to approximately 14.5 million people in the first tranche, including vulnerable segments of the population, with the handout now being directly transferred to recipients’ bank accounts instead of through a digital wallet.
Economists caution that while about 36 million Thais have registered for the handouts, the impact will be limited and temporary, offering little relief to an economy grappling with structural issues and political instability. With high household debt, weak exports, and a decline in tourism due to the Covid-19 pandemic, Thailand’s economic growth lags behind its regional peers.
Despite the short-term boost in consumption from the cash handout, concerns remain about the lack of accompanying structural reforms to address the country’s deeper economic challenges. The program’s full implementation is also in doubt, given the historical tensions between the Shinawatra family and the military-royalist establishment.
Thailand’s central bank has raised doubts about the program’s benefits, labeling it a fiscally irresponsible initiative. Pressure from the government to cut interest rates to stimulate growth, along with concerns about the baht’s strength, could lead to rate cuts this year.
Economists question the sustainability of the growth boost from the program and its effectiveness in addressing Thailand’s structural issues. With uncertainties surrounding the program’s implementation and economic impact, the country faces ongoing challenges in achieving long-term economic stability.
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