Dividends from digital wallet scheme may fall short of expectations

Their concerns surfaced a day after the Treasury Ministry outlined the registration process, beginning August 1-15, for the 10,000-baht digital wallet, with an estimated 45 million participants.

Amornthep Chawla, CIMB Thai Bank's executive vice president and head of research, and Pipat Luengnaruemitchai, chief economist at KKP Research, both acknowledged the scheme's potential to provide a short-term stimulus but cautioned about long-term implications.

Amornthep viewed the digital wallet as a lifeline for struggling lower-middle-class households during the economic slowdown. 

However, he emphasised the need to monitor the scheme's impact beyond the initial distribution. While anticipating a boost to the fourth-quarter gross domestic product (GDP), he expressed concerns about the sustainability of the economic recovery.

"This project may stimulate the economy in the short term, but I'm worried about the long-term consequences," he said. "It [the scheme] is not about creating sustainable jobs or income, but rather a populist measure. If the economy stalls after the scheme ends, we might face a vicious cycle of needing stronger and stronger stimulus."

Pipat concurred that the digital wallet would contribute to GDP growth but with a smaller-than-expected impact. He estimated the positive effect on GDP at a modest 0.4 to 0.7%.

"While the retail sector will benefit from increased circulation, the overall economic impact is less than anticipated. The 400-billion-baht investment, equivalent to 2% of GDP, doesn't translate into a 3-5% GDP boost," he said.

Pipat identified four key factors limiting the scheme's effectiveness: the potential for consumers to reallocate existing spending rather than increasing overall consumption; the leakage of spending on imported goods; the temporary nature of the stimulus, similar to past projects like the first-car scheme; and, the possibility of offsetting budget cuts in other areas.

"We need long-term reforms alongside short-term measures," Pipat said. "The tightening financial conditions, coupled with rising government debt and household debt, pose significant risks to the Thai economy."

Both economists underscored the importance of careful monitoring and evaluation of the digital wallet scheme to inform future economic policies.

They stressed the need for long-term economic reforms alongside short-term measures, highlighting risks such as the tightening financial sector, rising government and household debt, and reduced bank lending. The digital wallet scheme, while offering temporary relief, raises questions about sustainable economic growth and the potential for creating dependency on similar measures in the future, they said.