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The government’s 10,000 baht handout policy could potentially allow the Thai economy to expand by 5% next year. However, this growth might be short-term, and it could lead to inflation, cautioned Kirida Bhaopichitr, the director of the Economic Intelligence Service at the Thailand Development Research Institute.
She said the amount of money injected into the economy would be equivalent to 3% of the GDP, and the policy would stimulate economic activity. Nonetheless, the policy could also result in higher product prices due to the sudden injection of money into the economic system. The Bank of Thailand (BoT) might need to increase the policy interest rate to control inflation, and the government might be forced to raise taxes to cover their debts incurred from the policy.
Kirida recommended that the policy should primarily focus on low-income earners because they need the money the most, and most of them are likely to spend it immediately, leading to greater circulation of the injected funds in the economic system. She also suggested lifting limitations on where the money can be spent because many people commute to major cities for work, and it would be impractical to return to their hometowns just to spend the handout.
Kirida stated her expectation that some of the 560 billion baht required to fund the policy would come from loans, and the government might have to increase taxes, such as VAT, or broaden the tax base by introducing new taxes or finding ways to include more businesses in the tax system.
Debt moratorium, energy and electricity prices, visa exemption
Regarding the three-year debt moratorium policy for farmers and SMEs, Kirida suggested that the government should target those who were genuinely affected by the pandemic and consider adding conditions, such as requiring them to establish an accounting system to improve their access to loans in the future.
The policies aimed at reducing diesel and electricity prices will help lower living and production costs. However, Kirida emphasized that these measures are not without consequences, and if the government extends them into the next year, public debt could rise accordingly.
She also expressed doubts about whether the visa exemption policy for Chinese tourists would meet revenue expectations, given the current state of the Chinese economy and the increased prices of plane tickets from major Chinese cities to Thailand compared to pre-pandemic levels. The Chinese government is also actively promoting domestic tourism with various incentives.
Daily minimum wage
Regarding the policy to raise the daily minimum wage to 400 baht per day by January, Kirida argued that based on inflation and workers’ production over the past 12 years, the wage should currently be around 380 baht per day, rather than the current average of around 336 baht per day. Therefore, increasing it to 400 baht per day, representing a 30% increase, might be too high, potentially forcing businesses to raise product prices, lay off workers, or relocate closer to major cities to reduce logistic costs. She suggested that the government might want to maintain the policy where the wage varies from province to province to prevent business relocations.
Looking ahead to the Thai economy next year, Kirida advised investors to monitor external factors, such as the movement of US interest rates, which are expected to remain high, and the possibility that the BoT will continue to raise its rates as well. Inflation is also a concern, with expectations of an increase from around 2% in 2023 to 2.5% in 2024, or even 3.5-4%, depending on the government’s stimulus measures and the adjustment of the daily minimum wage. The Thai baht is expected to trade at around 34-35 baht per USD, while global oil prices are expected to rise, as the Organization of the Petroleum Exporting Countries is contemplating production cuts.
On a positive note, Kirida suggested that the 10,000 baht handout policy should stimulate domestic consumption for at least six months, and exports could improve compared to the current year, with an expected increase in foreign investments as Chinese companies increasingly consider relocating to Southeast Asia.