Bangkok Post – Analyst sees scant impact from digital wallet

The government’s flagship digital wallet policy can improve the economy by only 0.4 percentage points, mostly in 2025, after the project’s budget was reduced by 50 billion baht to 450 billion, as uncertainties remain regarding the funding, according to an analyst.

The government subcommittee overseeing the 10,000-baht digital handout scheme decided to scale down the funding of the programme to 450 billion baht as legal complications prevented it from utilising the state-owned Bank for Agriculture and Agricultural Cooperatives, relying instead on the budgets for 2024 and 2025.

The Finance Ministry expects the project to increase GDP growth by 1.3-1.8 percentage points as initially projected, despite the reduction in funding.

According to BofA, a unit of Bank of America, the project’s financing will comprise 122 billion baht from the 2023/24 supplementary budget, 43 billion from the Emergency Fund or from other budget cuts, 152.7 billion from the 2024/25 budget, and 132.3 billion from other forms of budget management of the 2024/25 budget.

“As a consequence, only 274 billion baht of the policy would be financed by new deficits, while the remainder would be financed by budget cuts, though this has not been finalised,” Pipat Luengnaruemitchai, emerging Asia economist at Kiatnakin Phatra Securities, wrote in a BofA research note.

The subcommittee now presents its proposal to the digital wallet committee, chaired by Prime Minister Srettha Thavisin, on July 15.

The premier is scheduled to provide full details of the programme on July 24, then the Finance Ministry is expected to submit it for cabinet approval on July 30.

“It is possible the programme may be scaled down further as it remains unclear whether the 132 billion baht of funds from other budgets in the 2024/25 fiscal year can be found, given that the budget bill is already under parliamentary consideration. It would need a lot of negotiation,” said Mr Pipat.

However, he said there is still some room from the emergency budget for the 2023/24 budget.

The scheme is still subject to further delays given implementation issues because the government insists on using a new “super app” based on a new open loop payment system, rather than an existing app and payment infrastructure.

“It could be a challenge to onboard 50 million people to start the programme within this year, as the government expects,” said Mr Pipat.

Given these factors, he said he believes the net impact of the digital wallet policy would be around 0.4 percentage points of GDP, assuming a fiscal multiplier of 0.3 times. Most of the impact would likely be realised in 2025.