Digital wallet and e-refund schemes in Thailand face legal and funding challenges

The proposed digital wallet and e-refund schemes considered significant growth drivers for Thailand’s GDP next year, are potentially at risk due to legal and funding obstacles. Analysts have indicated that these challenges could lead to a substantial reduction in the implementation of these costly digital schemes in Thailand, which are scheduled for rollout next year.

Maybank Securities notes that legal obstacles in the implementation of the noted digital schemes in Thailand are perceived as the most significant hindrance to the successful deployment of these policies. Opposition parties have flagged Sections 140 of the Constitution and 53 of the State Fiscal and Financial Responsibility Act, both of which concern state funding and emergency funding limits. Additionally, academics point to potential legal issues related to Sections 20 and 62 of the Public Debt Management Act.

Maybank highlighted the potential risks of an unfavourable court ruling, stating in a research note, “Unfavourable rulings by the court could mean these stimulus measures may need to be scaled down significantly.”

The brokerage firm also referenced a 2013 case involving the Yingluck Shinawatra administration’s proposed bill for an additional 2 trillion baht in construction spending for a high-speed railway. The Constitutional Court deemed this extra spending unconstitutional, setting a precedent that might apply to the current situation.

Asia Plus Securities (ASPS) underscored funding concerns as the primary issue for the proposed 500 billion baht digital handout and 100 billion e-refund scheme, which are expected to stimulate spending by 100 to 200 billion baht. The government’s 2024 GDP growth target of 5% hinges on these policies, ASPS noted.

However, the brokerage warned of potential financial repercussions.

“If the government borrows an additional 500 billion baht, public debt may increase from 62.1% of GDP at present to 65%. Higher public debt may cause Thailand’s credit ratings to be downgraded.”

Maybank identified two potential beneficiaries of these stimulus schemes: Home Product Center (HMPRO) and COM7. The digital wallet scheme, set to run from May 2024 to April 2025, is expected to spur spending for 14 out of 16 months from January 2024, potentially benefiting HMPRO, a major player in home improvement retail, and COM7, which has a significant presence in the consumer discretionary sector, reported Bangkok Post.