Government’s main digital wallet strategy could bolster the economy by just 0.4 percentage points, largely in 2025, following a 50 billion baht reduction in the project’s budget to 450 billion baht, amidst ongoing uncertainties around funding, as per an analyst.
The oversight subcommittee handling the 10,000-baht digital handout plan opted to decrease the program’s budget to 450 billion baht due to legal complications impeding the use of the state-owned Bank for Agriculture and Agricultural Cooperatives, opting to utilize the budgets for 2024 and 2025 instead.
The Finance Ministry anticipates the initiative to enhance GDP growth by 1.3-1.8 percentage points as initially anticipated, notwithstanding the budget cut.
Bank of America’s BofA unit stated that the project’s finances would involve 122 billion baht from the 2023/24 supplemental budget, 43 billion from the Emergency Fund or alternative budget reductions, 152.7 billion from the 2024/25 budget, and 132.3 billion through other budget management methods for the 2024/25 period.
“Pipat Luengnaruemitchai, an emerging Asia economist at Kiatnakin Phatra Securities, noted in a BofA research report that only 274 billion baht of the policy will be funded through new deficits, with the rest coming from budget reductions, although this is yet to be finalized.”
The proposal is now being presented by the subcommittee to the digital wallet committee, led by Prime Minister Srettha Thavisin, on July 15.
The Prime Minister is expected to unveil comprehensive details of the program on July 24, followed by the Finance Ministry submitting it for cabinet approval on July 30.
“Due to uncertainties surrounding the availability of the 132 billion baht from other budget sources in the 2024/25 fiscal year, given the budget bill is already under parliamentary consideration, it is possible the program may face further reductions, necessitating extensive negotiations,” noted Mr. Pipat.
Despite, he mentioned potential leveraging of the emergency budget for the 2023/24 fiscal year.
The rollout is likely to experience additional delays due to implementation challenges since the government intends to introduce a new “super app” based on a novel open-loop payment system, instead of the existing app and payment infrastructure.
“It may pose difficulties to onboard 50 million individuals to commence the program within this year, as expected by the government,” highlighted Mr. Pipat.
Considering these variables, he estimates the net impact of the digital wallet policy would hover around 0.4 percentage points of GDP, assuming a fiscal multiplier of 0.3 times, with the bulk of the impact anticipated in 2025.
