Thai government seeks urgent economic stimulus amid rising household debt

The Thai economy is in a dire state and in urgent need of a stimulus package to prevent further deterioration, according to the government. This stance arises amid ongoing discussions about the true state of the economy, with some expressing doubts about the actual need for the government’s proposed US$313 million handout scheme, which would necessitate a loan of US$15.6 billion.

Prommin Lertsuriyadet, the secretary to the Thai prime minister, informed that several indicators depict slower growth compared to other regional countries, along with increasing household debt. This places the nation firmly within the grip of a crisis. He warned that without government intervention to stimulate the economy, the situation could rapidly worsen.

Prommin expressed the government’s view of every single individual as an economic engine to create growth. He added that the proposed US$313 million handout scheme, supported by blockchain technology, is considered the most effective way to reboot the economy. This policy was announced in Parliament, and Prommin underscored the government’s responsibility to implement it, reported Bangkok Post.

Surapong Suebwonglee, a national committee member on soft power development, defended the implementation of the digital currency giveaway in a Facebook post on Tuesday. He aimed to counter objections raised by a group of 99 academics, which included former Bank of Thailand governors. Surapong referred to the low GDP growth, slower money supply growth affecting liquidity, and escalating household debt as causes for worry.

Likening the economy to a bleeding patient, Surapong estimated this year’s GDP growth to fall below 2%, a figure lower than previous predictions. Last year, the Finance Ministry’s Fiscal Policy Office initially estimated this year’s GDP growth to reach 3.85% but later revised it to 2.7%. The Bank of Thailand has predicted 2.8% growth.

Surapong, however, pointed out that with GDP growth in the first two quarters at 2.6% and 1.8%, it’s improbable that the total growth for 2023 would reach the projected figure of 2.8%. He mentioned the predictions of freelance economist Chartchai Parasuk, who anticipated growth in the third semester of 1.4% or 1.8% for the year overall.

GDP growth

He also pointed out that GDP growth is directly related to money supply growth. The latter only grew by 1.8% in the third quarter, compared to 3.3% and 2.0% in the first and second quarters, respectively. Furthermore, a capital outflow of US$241.5 million in the first three weeks of October raised concerns about whether the overall GDP growth would meet the 2.8% forecast.

Surapong noted that Thailand began experiencing liquidity issues in mid-2023, leading banks to withhold new lending. In July, excess liquidity was a negative US$26.8 billion, and this reached US$31.3 billion in August. He attributed this to significant capital outflows and the withholding of lending, leading to a third concern: 7.4% of household debts have been registered as non-performing loans since the second quarter.