Thailand seeks new stimulus after Q1 growth falls short

Following Finance Minister Pichai Chunhavajira’s announcement yesterday, Thailand needs additional stimulus measures to unlock its economic potential after experiencing lower-than-expected growth in the first quarter.

The country’s economy expanded by only 1.5% year-on-year in the first quarter. This performance, while surpassing analysts’ forecasts, fell short of the 1.7% growth recorded in the previous quarter, said Pichai.

“There was still growth but less than we had expected. We need to find measures to stimulate the economy, short-term ones.”

Pichai did not delve further into his statements regarding said short-term measures.

Pichai disclosed that the Cabinet approved a plan yesterday to increase the budget for the 2024 fiscal year. This boost is intended to finance the 500-billion-baht digital wallet stimulus programme.

The exact amount of the budget increase is to be decided this month but should not exceed the 122 billion baht previously indicated by the Budget Bureau, setting the total 2024 budget at 3.6 trillion baht.

Cabinet approval for this increased budget will be sought on May 28.

The budget for fiscal 2024, which started on October 1 last year, was only passed last month due to parliamentary delays caused by the protracted process of forming a new government post-election.

The digital wallet programme aims to distribute 10,000 baht to each of the 50 million people for spending within their localities over six months.

Although the Bank of Thailand recommended that this programme target vulnerable groups, the coalition-leading Pheu Thai Party insists that a broad-based stimulus is necessary for effective economic impact.

The government has previously indicated that the scheme would be financed through the 2024 and 2025 budgets, supplemented by a loan from the state-owned Bank for Agriculture and Agricultural Cooperatives.

In efforts to fund this signature handout scheme, the administration has already agreed to expand the 2025 budget deficit by 152 billion baht, increasing next year’s budget to 3.75 trillion baht.

Last month, the Ministry of Finance reduced its 2024 economic growth forecast to 2.4% but noted that growth could reach 3.3% if the digital wallet initiative proceeds in the fourth quarter as planned.

The National Economic and Social Development Council yesterday slightly lowered its 2024 growth outlook to between 2.0% and 3.0%, but indicated that the handout could add 0.25 percentage points to this year’s growth.

Southeast Asia’s second-largest economy has struggled compared to regional peers, facing challenges such as high household debt, elevated borrowing costs, and weak exports amidst an uneven recovery in China, its top trading partner, reported Bangkok Post.