Forced by the emerging global situation, the Thai government is abandoning its flagship cash handout program under the digital wallet scheme, marking a strategic shift in its economic policies.
The decision comes in response to mounting criticism of the government, dwindling financial resources and the adverse effects of global trade tensions, which have necessitated a recalibration of priorities toward sustainable growth and fiscal prudence.
The digital wallet scheme, initially conceived as a means to inject liquidity into the Thai economy to boost consumption, has faced persistent criticism since its inception.
Economists and various stakeholders have argued that the program represents a misuse of public funds, as evidenced by the minimal success in imparting economic stimulus from the initial two phases of implementation of the scheme. Concerns about its effectiveness have been compounded by Thailand’s growing public debt and the need for responsible fiscal management.
On May 20, the Thai Cabinet officially resolved to delay phase three of the digital wallet handout. In its place, the government has approved a 157-billion-baht economic stimulus plan.
This pivot aligns with recommendations from the Bank of Thailand and state think tank National Economic and Social Development Council (NESDC). Both institutions urged the government to channel resources into projects that promise long-term growth and economic resilience.
PM’s perspective and external pressures
Prime Minister Paetongtarn Shinawatra underscored the necessity of reassessing Thailand’s spending plans, citing the United States' reciprocal tariff measures as a significant factor behind the shift.
These tariffs have created uncertainties for Thai exports, a key driver of the nation's economy.
The government’s decision to redirect funds reflects an acknowledgment of these external pressures and the importance of adapting to changing global trade dynamics.
President Donald Trump has ramped up global trade tensions with his recent threat to impose a 50 per cent tariff on goods from the European Union. With global trade negotiations stalled, Thailand must remain vigilant in its fiscal stance to mitigate potential risks, according to many economists.
Focused stimulus package
Finance Minister Pichai Chunhavajira has announced a 157-billion-baht stimulus package targeting investments in six critical areas: water infrastructure, transportation, tourism, export development, employment at the village and community levels, and promoting the digital economy and education.
The government aims to expand tourism into secondary cities through projects such as the creation of man-made destinations and the renovation of existing facilities at tourism sites.
Additionally, soft loans may be advanced to exporters and small and medium-sized enterprises (SMEs) to support economic growth.
The opposition has voiced concerns about the government's rush to implement the stimulus package. Woraphop Viriyaroj, an MP from the People’s Power Party, acknowledged the importance of accelerating public investment within the current 2025 fiscal year, which ends on September 30.
However, he criticized the short notice given to local governments, which were asked to propose projects by May 26.
“It is alright that the government wants to accelerate public investment,” said Woraphop, “but such urgency risks compromising thorough planning and execution.”
The government’s revised priorities have garnered support from various quarters.
The Federation of Thai Industries has applauded the decision, noting that it represents a step in the right direction.
Similarly, the NESDC and the Bank of Thailand have commended the suspension of the cash handout scheme, emphasizing the importance of sustainable investment.
Why the government opted for a course correction
Before altering its course, the government had insisted that it would implement the third phase of the digital wallet handout scheme and was preparing for a fourth phase of cash handouts.
However, it has now made a near U-turn by announcing delays to the digital wallet scheme and shifting its focus to investment.
Why this sudden change? The government has faced heavy criticism for its economic management, with many suggesting that it has prioritized short-term consumption stimulus at the expense of long-term investment.
“It would be better than cash handouts; public investment would directly boost growth,” says Yuthana Sethapramote, an economist at the National Institute of Development Administration graduate school in Bangkok.
However, there may be a hidden agenda behind this shift. The coalition government appears to be facing political instability, especially due to conflicts between coalition partners Pheu Thai Party and Bhumjaithai Party over accusations of collusion in Senate elections.
“This could be politically motivated, as parties may seek a compromise on economic policies,” Yuthana added.
The digital wallet scheme is solely associated with Pheu Thai, while public investment spending could benefit other parties that oversee or share management responsibilities in transport, tourism, and agriculture ministries.
Yuthana also voiced concerns about the details of the new investment plan.
“I’m afraid that it might focus on quick-win projects like co-payment for domestic travel, while better initiatives would involve the rehabilitation of tourism sites or the development of new ones.”
The government's pivot to investment raises many questions and highlights the complexity of balancing economic priorities with political challenges.
Economic growth and challenges
Despite the challenges, Thailand’s gross domestic product (GDP) grew by 3.1% year on year in the first quarter, surpassing market expectations.
This growth was largely attributed to a surge in exports that grew 13.8 per cent, as US importers rushed to stockpile Thai products ahead of the reciprocal tariffs taking effect.
While this temporary boost brought optimism, the momentum is unlikely to sustain in the coming quarters.
The NESDC has warned that the growth rate will slow as the impact of high US tariffs permeates the Thai economy.
Consequently, the council has lowered its economic growth forecast for the year to just 1.8%, down sharply from 2.8 per cent projected in February.
This sobering projection reflects the risks posed by declining exports and the broader effects of Trump’s trade policies, which are expected to be detrimental to global trade flows and Thailand’s export-driven economy.
Woraphop noted that the GDP growth rate in the first quarter of 2025 was not impressive compared to the same period last year, largely due to budget delays that had already hampered economic performance in the previous year.
While a 14-per-cent surge in the export of goods drove growth, private investment remained weak, contracting by 0.9 per cent, and bank lending has contracted for three consecutive quarters.
“The challenge ahead is to determine how government policy can facilitate lending by banks to SMEs,” he said.
He also emphasized the importance of successful trade negotiations with the US as a crucial factor for economic progress.
