The proposition of a 10,000-baht digital wallet handout by the Thai administration has provoked a lively discussion. Alarms have been raised regarding its plausible repercussions on the country’s public debt. It was put forth by Deputy Finance Minister, Julapun Amornvivat, that this much-needed financial shot in the arm was crucial, given the average 2% annual economic growth over the last ten years, which is deemed not enough to sustain the country’s graying populace in the near future.
The nation’s public debt-to-GDP correlation is also prone to swell due to the tame GDP growth. Should the GDP growth hang under a 5% threshold, it could lead to a circumstance where, as soon as 2027, public debt outstrips 70% of GDP, overreaching the sustainable limit anchoring the State Fiscal and Financial Discipline Act.
While this proposal might resonate as urgent, the opposition parties and economic gurus beg to differ, underscoring that although the Thai economy remained motionless, it did not experience a downturn as is the case in other countries that adopted a cash stimulus.
The mooted digital wallet scheme, requiring a sizeable loan of 500 billion baht, might call for a revision of the government’s medium-term fiscal plan (MTFP). Pre-proposal, the MTFP prophecies had projected public debt at 62.9% of GDP in 2023, anticipating a growth to 64.8% in 2027 with the economic expansion oscillating between 3.2% and 3.4% from 2024 to 2027. The kink in the hose is that these stats fail to factor in the 500 billion baht loan birthed by the digital wallet project.
Sitting at the Deputy Managing Director chair at Kasikorn Research Center (K-Research), Nattaporn Triratanasirikul opines that the government, domestically, still has wiggle room to borrow the proposed 500-billion-baht. A fresh round of borrowing would tentatively nudge the public debt-to-GDP ratio from the existing 61% to a peak of 67%.
Snags loom over the exact roll-out timing of the bonuses since the bill to borrow the proposed 500 billion baht needs the nod from the parliamentary and Senate. With the implementation of the digital wallet enterprise, the public debt is predicted to surge, and under the current spend strategy, will total 64% of GDP by the tail end of the coming year, a figure that is still safe, dwarfed by the 70% roof.
Critics have blown the bugle over the implications of borrowing for populist strategies on fiscal longevity. However, several market watchers and business houses reckon that the digital wallet bonus will juice up consumer purchasing potency and add fuel to the GDP ignition.
The incessant tug of war over funding these policies might have a rocky road ahead due to looming legal minefields. Dissenting parties are invoking the Constitution and the State Fiscal and Financial Responsibility Act’s clauses that spell out the legalese surrounding state and emergency support ceilings.
According to a report by BMI Research, a subsidiary of the Fitch Solutions Group, Thailand’s public debt as a share of GDP took a leap and landed at 61% in the 2022 fiscal, which was a jump from the 41.2% before the pandemic. The move by the government to embrace populist strategies to tackle economic performance echoes the times of the Thaksin Shinawatra reign from 2001 to 2006. With these policies in place, growth in the medium term should see a boost, but the elephant in the room remains fiscal sustainability. If the 500 billion baht borrowing is given the green light, public debt might step up from 62.1% of GDP to 65%, causing a potential slump in Thailand’s credit ratings, hence casting a long shadow over the nation’s fiscal horizon.