99 economists go public to oppose digital cash handout policy

The Srettha Thavisin government is in the process of implementing an election campaign promise of handing out 10,000 baht to Thai citizens aged 16 years and above, to be spent in a limited area within six months, with the aim of giving the economy a push.

The economic experts, however, argue that it was “not worth the cost”. They advanced the following reasons, according to a Krungthep Thurakij news report:

Economic recovery

The Thai economy is already in a recovery phase. Most analysts expect the Thai economy to expand by around 2.8% this year and 3.5% next year. Therefore, there is no urgent need for the government to spend a significant amount to stimulate domestic consumption. The recent economic recovery has been driven significantly by personal consumption, which expanded by 7.8% in the second quarter of this year, the highest in 20 years. It is expected to grow by 6.1% for the whole year and 4.6% next year. Hence, there is no necessity to further stimulate personal consumption. Instead, the focus should be on government spending to enhance investment and exports, the experts said.

Budget limitations

The government's budget is limited, and such a massive amount — around 560 billion baht — would limit opportunities for investments in infrastructure, human resources development, digital infrastructure, and systematic water management, all of which are crucial for sustainable long-term development. These investments would create potential for long-term growth rather than short-term consumption stimulus. Spending on these areas would also prevent creating a burden of public debt for future generations. The significant opportunity cost lies in using funds to create jobs that generate income for the people, they said.

Overly optimistic

The government's plan to distribute 560 billion baht into the system as a form of financial stimulus is viewed by most economists as an overly optimistic strategy. Currently, empirical data from research suggests that the fiscal multiplier resulting from government spending in the form of transfers or direct cash giveaways is less than 1, lower than the fiscal multiplier for direct spending and state investments. Those in charge of policy hope that this strategy will stimulate the economy, but in reality, it's like a floating object. “No one can retrieve money from thin air. There is no money growing on trees or falling from the sky. Eventually, the public will have to pay back, either in the form of increased taxes and/or higher commodity prices due to inflation caused by increased money supply,” the economic experts said.

Increasing debt

Thailand is in a cycle of rising interest rates since 2022 due to significantly increased inflation and a substantial amount of debt. Regardless of whether the government issues bonds or borrows from state enterprises or financial institutions, it will inevitably lead to higher interest rates for both the government and the people, they argued.

The current public debt is approximately 10.1 trillion baht, or 61.6% of GDP. This debt burden will require higher interest payments when it's time to repay or refinance. This situation doesn't even account for the increased interest costs resulting from the 10,000 baht digital cash giveaway policy.

Need to reduce deficits

During the global pandemic and economic downturn, nearly every government faced the need to have unbalanced budgets and accumulating significant debt to invest in public health, stimulate the economy, and aid those affected. However, after the pandemic and economic downturn passed, many countries demonstrated prudent planning by reducing government deficits and public debts (fiscal consolidation) to create “fiscal space” to cope with potential economic crises in the future.

The policy of distributing 10,000 baht in digital cash seems misguided, especially for countries like Thailand, where the revenue from taxes is only 13.7% GDP, considerably lower than many other countries. Poorly considered fiscal policies, without caution and without taking into account the future consequences, can affect the country's credit rating. This, in turn, will lead to higher borrowing costs for both the Thai government and the private sector, they warned.

Societal injustice

Distributing 10,000 baht to every person above the age of 16 is a policy that creates profound societal injustice, the experts said. Wealthy individuals above 16 years old receive financial aid even though they don't need it. For countries entering an ageing society, like Thailand, fiscal preparedness is crucial. While the working-age population decreases, the proportion of elderly people increases rapidly. The burden of social welfare and public health expenses will significantly rise. Far-sighted leaders should use the budget wisely, maintain fiscal discipline, and stability, they advised.

For the aforementioned reasons, the economists and economics professors are calling on the government to cancel the digital cash handouts for individuals aged 16 and above. The benefits to the country are considerably less than the costs incurred. Moreover, this policy creates a foundation for short-term cash giveaways without considering discipline and long-term fiscal stability, they said. If assistance for low-income groups is necessary, it should be targeted specifically rather than avoiding a comprehensive approach. Thailand's fiscal stability and its ability to collect taxes do not support such actions.