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September 25th was the day millions of Thais have been waiting for more than a year as it marks the beginning of the payment of the much awaited 10,000 Baht cash handout that the government of Pheu Thai party had promised in its election campaign.
The so called ‘phase 1’ of the ‘Digital Wallet’ program goes into action on September 25th with about 4 million of the nearly 14.5 million people who are supposed to get the cash handout will get the money on September 25th and each day, over the next 5-days will receive the money.
Economists estimate that the 145 billion Baht pumped into the economy would generate up an economic boost of up to 0.35% of the gross domestic product (GDP) during the course of this year.
The first phase will involve a cash handout to 12.4 million welfare cardholders and 2.1 million registered disabled individuals, totaling 14.5 million people. The cash can be used for any goods and services at any type of store.
According to the government data, the Ministry of Finance (MOF) categorizes welfare cardholders into three groups: 1) the elderly in rural areas who constitute 30% of all cardholders primarily residing in the North and Northeast, 2) young workers registered and residing in rural areas, and 3) young workers registered in rural areas but residing in urban areas.
The latter two groups comprise 70% of all cardholders. It remains to be seen for the last group about how their spending patterns will unfold, whether it will focus on day-to-day expenses in urban areas or directing funds back to their hometowns. For the 2.1 million disabled people, 4.8% of them live in Bangkok, 21.1% in the Central and East, 39.1% in the Northeast, 12.7% in the South, and 22.3% in the North.
The budget will be drawn directly from the 2024 supplementary budget of 122 billion Baht and the 2024 emergency budget of 23 billion Baht, totaling 145 billion Baht or 0.8% of nominal GDP.
Economists estimate that the impact of this 145 billion Baht of cash’s infusion to the economy would have positive impact on the overall economy.
Estimates range from 0.2% to 0.35% with some economists saying that the upside to 2024 GDP forecast will be because of the 0.2-0.3x fiscal multiplier. Assuming that most handouts will be spent in Q4 2024, the year-on-year growth could be as high as 4.5% in Q4 2024, a move that would help push the overall economic growth of the country to be higher than most estimates projected a few months ago.
There are no details about the ‘phase 2’ of the program, including whether it will involve digital tokens or cash, when it will start, how many people will be eligible, or the required budget.
As September 16th (the last date to register for eligibility was September 15th), the number of registrations via smartphones stood at 36 million, which includes individuals already covered in the ‘phase 1’ or those who were not eligible. The 2025 budget has provided for 152 billion Baht in economic stimulus program. The government has mentioned that the stimulus could be broken it down into 2 phases or could be used for investment projects.
Continued Govt. Support & Rise in External Demand
The move to inject 145 billion Baht in the ‘phase 1’ of the economic stimulus program by the government is a welcome move in the markets as it will help drive economic growth in the short term and kick-start the economy that has been relying heavily on tourism income to keep it going.
Enrico Tanuwidjaja, economist at UOB Group, said in a note to clients that he too expects the disbursement of the 10,000 Baht cash would help kick-start the sluggish domestic demand side of the equation for the Thai economy.
This he says comes amid a ‘notable decline’ in disbursement of the fiscal budget. According to the latest data on a fiscal year basis from July, total actual spending fell 7.1% year-on-year (YoY) (vs. -6.0% YoY in the previous month), marking the second consecutive month of contraction. This was driven by a significant drop in current expenditure, which decreased by 9.9% YoY, compared to a 5.7% YoY decline in June.
He added that in July/August, the service sector continued to be the main growth engine on the supply side. The monthly Service Production Index (SPI) grew steadily, rising 6.9% YoY, up from 5.6% YoY in June.
He said that this growth was driven by solid performance in accommodation and food services (+18.8% YoY compared to 16.9% YoY in Jun), wholesale and retail trade (+10.6% YoY vs. 8.9% YoY in Jun), transportation (+5.2% YoY vs. 3.4% YoY in Jun), and ICT (+12.7% YoY vs. 10.7% YoY in Jun), in line with the surge in foreign visitors. With the high season for tourism approaching in the fourth quarter of 2024, the service sector is expected to expand steadily.
The initiative by the government is also something that the business side has also been seeking both in terms of helping increase the consumption and also helping in managing the cost for the companies.
In a recent survey conducted by UOB, whereby more than 600 companies were surveyed, there was an overwhelming response for the government to help manage the cost, increase the cashflow of the companies and other measures.
The 10,000 Baht handout that does not restrict the usage, is one such initiative that could help manage many of the needs as it pumps money directly into the economy and thus helping entrepreneurs in keeping their business growing.
