The Thai government's ambitious cash handout scheme aimed at stimulating the economy has fallen short of expectations, raising questions on whether the massive stimulus budget could have been put to better use.
Under the ruling Pheu Thai Party’s flagship digital wallet scheme, which is less ambitious than earlier intended, the government has already distributed a total of nearly 200 billion baht to lower-income earners, as well as to groups of people with disabilities and the elderly.
In the first phase, the coalition government transferred 10,000 baht each in September to nearly 14.5 million vulnerable individuals and people with disabilities, which cost the exchequer over 144 billion baht, according to the Finance Ministry’s Fiscal Policy Office.
In the second phase, the government plans to provide 10,000 baht per person to three million elderly individuals in January, February, March and April, a total of around 30 billion baht.
The government has said that it would implement the third phase in the second quarter of the year. This phase is expected to cost between 150 to 160 billion baht and will target 15 to 16 million eligible individuals, including students with an annual income of no more than 840,000 baht. This last cash transfer is expected in the form of digital tokens.
The Pheu Thai Party had originally budgeted 500 billion baht to assist people aged 16 and above, with handouts to around 50 million of Thailand’s total 66 million population.
The party claimed that this initiative would inject significant funds to revive sluggish economic growth. Strong opposition from academics and opposition politicians, who argued that it would be an unnecessary use of taxpayers' money to boost short-term consumption, forced the government to delay and adjust its plans over time.
The economic impact of the digital cash transfer programme has not been as impressive as the government had expected, primarily due to a smaller multiplier effect.
Woraphop Viriyaroj, a member of the Parliament from the People's Party, criticized the program as a waste of taxpayers' money, stating that the returns are very limited.
“The pattern has been like this: the government borrows money, injects three baht into the economy, and receives only one baht in return,” said Woraphop, who is also a member of his party's economic team. He urged the government to end the digital wallet scheme.
Preliminary estimates from the World Bank suggest that these cash transfers raised GDP growth by 0.3 percentage point in 2024, based on an estimated fiscal multiplier of 0.4.
However, this comes at a high fiscal cost of 145 billion baht, or 0.8 per cent of GDP, according to the Thailand economic monitor report released by the World Bank on February 14.
Impact on public debt
Public debt has reached 63.3 per cent of GDP and is projected to continue rising in line with the expanding budget deficit for fiscal year (FY) 2025, driven by increased spending, particularly for fiscal stimulus and cash transfers, according to the World Bank.
In the last month of FY 2024 (September), the fiscal deficit widened primarily due to accelerated current and capital expenditures.
Current spending increased significantly because of the 10,000-baht cash transfer scheme, which was part of the first round of the digital wallet program for 14 million social welfare cardholders, approximately 42 per cent of the population in the lowest income deciles, according to the World Bank.
Meanwhile, Woraphop expressed concern about the ballooning budget deficit. The government is running a fiscal deficit of 4 per cent of GDP in FY 2025 and is projected to maintain this level in the next fiscal year, which is significantly higher than the average for peers with similar credit ratings.
Woraphop warned that the country risked facing a credit downgrade if the government continued to widen the fiscal deficit. A lower credit rating would force the government to borrow money at a higher cost.
Impact of cash transfers on poverty
According to the World Bank, poverty declined in 2024, supported by the ongoing economic recovery and the cash transfer scheme. Poverty is estimated to have decreased to 8.2 per cent in 2024, driven by stronger economic growth and easing inflation.
The cash transfers likely boosted household consumption, contributing to a 3-percentage point reduction in poverty at the upper middle-income international poverty line of $6.85 per person per day.
Additionally, inequality is estimated to have declined by about 1.5 Gini points.
The World Bank report, however, warns that achieving sustainable progress in the medium term will require addressing vulnerabilities to climate-related shocks, such as this year’s flooding, as well as structural challenges related to aging and labor incomes.
Economic outlook and impact of cash transfers
The cash transfers are expected to partially boost private consumption this year. The World Bank expects economic recovery to gain momentum in 2025, driven by stronger domestic demand and fiscal stimulus, while external factors are expected to slow slightly.
Growth is projected to accelerate to 2.9 per cent in 2025, up from 2.6 per cent in 2024.
This growth will be supported by a rebound in investment, aided by higher budget execution and the implementation of infrastructure projects compared to the previous year.
Tourism and private consumption will remain key drivers of growth, albeit slowing. Tourism is projected to return to pre-pandemic levels by mid-2025.
Private consumption will benefit from fiscal stimulus, particularly from the cash transfers under the digital wallet scheme, but will face challenges from the debt deleveraging cycle and stricter lending standards.
Growth of goods exports are expected to moderate slightly due to slower growth in the US and China, despite the ongoing global electronics upcycle.
In 2026, growth is projected to slow to 2.7 per cent, with output levels expected to reach their potential by 2028, according to the World Bank report.
