K-Research Raises Alarm Over Thailand’s Sovereign Credit Rating Amidst Growing Stimulus Spending
In an effort to stimulate the national economy, the Thai government has introduced a unique initiative – a 10,000-baht digital wallet scheme. This policy, which has generated considerable interest, is part of a broader set of measures designed to reduce living costs and suspend debt for small-scale farmers and community enterprises. The plan involves loading 10,000 baht onto digital wallets to boost the grassroots economy, with the potential to add between 0.4% and 0.6% to Thailand’s growth next year.
How the Digital Wallet Scheme Works
The digital wallet scheme is relatively straightforward. It will be available to Thai citizens aged 16 and older with a 13-digit national ID card, including elderly people, individuals with disabilities and those receiving other forms of social assistance. These individuals will receive the full amount without deductions, totaling at least 50 million recipients. The 10,000 baht in the Digital Purse will be sent directly to citizens’ digital wallets. The funds provided to citizens will be in the form of vouchers, not cryptocurrencies. Businesses that accept the 10,000 baht from users can later exchange the digital money for physical currency at participating banks.
The government estimates that if 50 million individuals receive 10,000 baht each, this would amount to 500 billion baht, resulting in a 6-fold economic multiplier effect. This projection suggests a circulation of 3 trillion baht in the economy. The policy is expected to take effect before the Songkran Festival in April 2024, giving a much-needed boost to the Thai economy.
Concerns about the Digital Wallet Scheme
Despite the potential for positive economic impact, the digital wallet scheme has raised several concerns. Topmost among these is the impact on Thailand’s sovereign credit rating due to the significant funding required. In response, K-Research has reduced its Thai growth forecast for 2023 to 3% due to the global economic slowdown and China’s sluggish growth. Additionally, concerns have been raised about the potential for inflation and a hike in the prices of consumer goods, which could affect fiscal discipline and economic growth. The performance of the baht will also depend on fiscal discipline and economic growth.
One of the main concerns surrounding the digital wallet scheme is the source of funding for this initiative. However, the government has assured that the funding of the project would be strictly under the legal framework, and there are expectations of no problem in securing the money. The government is yet to announce the source of funds for this economic stimulus campaign. Critics argue that the government should spend money on improving education and upgrading the skills of the workforce as long-term solutions to stimulate the economy.
Prospects for the Digital Wallet Scheme
Despite the concerns, there is optimism about the potential of the digital wallet scheme. The scheme could create a new digital payment infrastructure, stimulating the economy and improving the country’s digital capabilities. A new digital infrastructure could also enable the government to promote specific policies and provide subsidies to targeted sectors such as small and medium-sized enterprises (SMEs). This could lead to better access to financial infrastructure and services for SMEs.
The 10,000-baht digital wallet scheme is an innovative approach to economic stimulation in Thailand. While it has raised concerns about fiscal discipline and credit ratings, the scheme also presents an opportunity to bolster the economy and pave the way for a more digital future. As the government works out the details of funding sources, the potential impact of this policy on Thailand’s economy is eagerly awaited.
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