The Thai government is going ahead with the third phase of its controversial digital wallet scheme, despite facing a barrage of criticism and economic concerns.
In a departure from the previous phases, where cash handouts were distributed directly to low-income groups, the disabled and the elderly, the third phase targets the younger population. Those aged 16-20 years would receive 10,000 baht per person in digital currency distributed via the “Thang Rath” app.
This digital handout comes with a caveat: it can only be used to purchase goods and cannot be converted into cash. For instance, students cannot use it to pay their tuition fees.
Key conditions for eligible applicants are similar to the previous phases: annual income should not exceed 840,000 baht, and individuals should not have combined bank deposits of more than 500,000 baht. Those who have served a prison term or were found to have broken any rules in other government beneficial schemes are disqualified.
The government will soon submit the proposal to the Cabinet for approval and the digital money could be distributed in June or early July, according to Deputy Prime Minister and Finance Minister Pichai Chunavajira.
The vision and rationale
Prime Minister Paetongtarn Shinawatra has championed this initiative as a means to invigorate the economy and familiarize the younger generation with digital technology. She believes the stimulus could drive economic growth by boosting consumption.
Additionally, by weaving technology into the financial habits of the youth, the government hopes to foster a more tech-savvy populace.
Comparison with previous phases
The first two phases of the digital wallet scheme provided cash handouts to vulnerable groups. The government had to take the cash option because of delays in getting the software up and running on time.
Each eligible individual received 10,000 baht in cash, which put pressure on the national budget. The two phases cost 145 billion baht and 30 billion baht respectively.
A total of around 14.5 million people in vulnerable groups and those with disabilities, as well as 3 million senior citizens benefited from it. Phase three expects to reach 2.7 million people at an estimated cost of 27 billion baht.
These phases aim to provide immediate relief amidst the economic slowdown and also to lower the high income disparity between the rich and the poor, according to government officials.
The latest phase, however, shifts the focus to the younger generation and integrates digital payments. The Thang Rath app, through which the digital currency is distributed, will ensure that the funds are spent within the economy, thereby preventing the accumulation of cash reserves while promoting active spending.
The Thang Rath app also requires them to spend money in their district areas.
Opposition and economic concerns
Despite the government’s optimistic outlook, critics and economists have raised concerns. Assoc Prof Yuthana Sethapramote from the National Institute of Development Administration argues that the previous phases of the digital wallet scheme did little to stimulate long-term economic growth.
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.
He contends that the current economic conditions do not necessitate short-term boosts like those required during the COVID-19 crisis. Instead, the country needs sustainable investment that generates future income and tax revenues, which could be used to alleviate the high public debt, currently exceeding 64 per cent of GDP as of January.
Prof Yuthana also suggests that the government’s focus on the younger demographic may be politically motivated. By targeting individuals who will soon reach voting age, the ruling party could be attempting to secure future electoral support.
Yuthana also does not agree with the government’s rationale of using the digital wallet scheme to make the people more conversant with digital technology. He argues that consumers are already very keen about mobile banking and even do money transfers online.
Contrasting views on political influence
While some, like Prof Yuthana, believe the scheme could sway young voters, others disagree. Nonarit Bisonyabut, a senior researcher at the Thailand Development Research Institute (TDRI), believes that money cannot buy votes, especially of the younger generation.
He cites the 2023 general election, where the People’s Party, which advocated for substantial reforms, won the most number of seats in the House of Representatives. This, he believes, demonstrates the youth’s desire for genuine transformation rather than short-term financial incentives.
Economic outlook and global context
Proponents and critics of the digital wallet scheme agree on one point: Thailand’s economy is fraught with challenges. Global trade uncertainties, exacerbated by trade wars initiated by US President Donald Trump, have hindered economic progress.
Additionally, domestic political issues such as Thailand being accused of human rights abuse against local political activists as well as the controversial decision of the government to deport 40 Uyghurs back to China, have strained its relationships with major trading partners, such as the European Union and the United States.
Economic experts advocate strategic investments that would foster long-term growth and stability. They emphasize the need for structural reforms and projects that generate sustainable income, arguing that such investments are crucial for reducing the national debt and achieving economic resilience.
The Thai economy grew 2.5 per cent last year, lagging behind major Asean countries who grew 4-7 per cent.
The National Economic and Social Development Council (NESDC), a state-owned think tank, projects the economy to expand between 2.3 to 3.3 per cent this year.
The NESDC makes the assumption that growth of public investment would decelerate to 4.7 per cent this year from 4.8 per cent. Private consumption would expand 3.3 per cent, slowing from 4.4 per cent last year, and the export of goods in US dollar terms would slide to 3.5 per cent growth from 5.8 per cent last year.
Exports are subject to the volatility of global trade amid the current intensified trade tensions.
The debate continues
As the government prepares to roll out the third phase of the digital wallet scheme, and with plans for the fourth phase already being drawn up, the debate over its efficacy and intentions continues.
The Paetongtarn administration, which earmarked 150 billion baht for stimulating consumption, remains steadfast in its belief that the scheme will bolster the economy and promote technological adoption.
The opposition, however, continues to call for more prudent and impactful economic policies.
“The experience of the co-payment scheme implemented by General Prayut Chan-o-cha and the digital wallet scheme by Paetongtarn for boosting consumption has shown that they were not very successful in stimulating economic growth,” Yuthana said.
