Hoping for a spending bonanza

The initial phase of the government’s cash handout is expected to lift the Thai economy in the coming months, according to industrial leaders and brokerages, with some suggesting targeted assistance in the second phase for people with more purchasing power.
The government handed out 10,000 baht in cash per person to 14.5 million welfare cardholders and disabled people in the first phase.
The distribution was initially intended to be via a smartphone app, with the money to be spent in communities.
The Finance Ministry deemed the first phase successful in stimulating the economy, as more than 14 million people received transfers from Sept 25-30.
As of last week, Deputy Finance Minister Paopoom Rojanasakul confirmed the government has sufficient funding for the second phase of the scheme.
He said the second phase will proceed, but the method and timeline will be determined later by the economic stimulus committee, which is chaired by the premier.
FISCAL MULTIPLIER
Nuttaporn Triratanasirikul, deputy managing director of Kasikorn Research Center (K-Research), said the fiscal multiplier for the cash handout is 0.3, higher than for the original digital wallet scheme, as there are less conditions for spending in this iteration.
For example, recipients were barred from buying many items in the digital wallet scheme, and the handout must be spent in recipients’ communities at stores registered under the scheme.
“The recent handout can be spent anywhere and because it was cash, the fiscal multiplier to the economy is higher,” Ms Nuttaporn told the Bangkok Post.
Two weeks ago the think tank maintained its 2024 GDP growth forecast at 2.6%, taking into account the effect of a cash handout estimated at 150 billion baht, she said.
Details of the second phase of the scheme, expected to be financed by a government budget of 150 billion baht, have not been revealed, making it difficult for economists to evaluate the impact, said Ms Nuttaporn.
“The second phase might be only 5,000 baht per person, according to some news reports, or it could be shelved because of the adverse impacts of the ongoing floods on the economy,” she said.
K-Research estimates the flooding could cause economic losses of at least 20 billion baht.
“We anticipate the damages will be in line with the floods in 2022, but less than the amount from the devastating floods in 2011,” said the think tank.
Rakpong Chaisuparakul, senior vice-president at KGI Securities (Thailand), said the first phase of the cash handout for 14.5 million people in vulnerable groups will support economic growth in the coming months.
The initial phase should boost Thai GDP growth in the third and fourth quarters through more active consumption, said Mr Rakpong.
“The handout is a major reason why we became more bullish on the Thai commerce sector, which will be a prime beneficiary from this consumption stimulus,” he said.
KGI economists project the cash handout driving fourth-quarter GDP to grow more than 4.0% year-on-year, exceeding earlier estimates, said Mr Rakpong.
Asia Plus Securities (ASPS) said the combination of the cash handout, the fiscal 2025 budget bill of 3.75 trillion baht, effective from Oct 1, Google’s data centre investment plan in Thailand, and the tourism peak season should enable Thailand’s economy to have robust growth for the next six months at least.
“The focus revolves around the digital wallet scheme,” said the brokerage, with Mr Paopoom confirming the second phase will proceed with a budget of 187 billion baht already allocated.
The economic stimulus board will decide whether 5,000 or 10,000 baht will be distributed as cash or digital money, noted ASPS.
ECONOMIC WHIRLWIND
Sanan Angubolkul, chairman of the Thai Chamber of Commerce, said the chamber and the University of the Thai Chamber of Commerce evaluated that the cash handout to vulnerable groups would create an economic whirlwind via two rounds.
“The chamber believes the scheme will stimulate the economy and recipients will mostly use the payment to buy food and daily necessities,” he said.
The chamber predicts GDP growth in the fourth quarter this year of 3.5-4% year-on-year. For the whole year, the GDP growth outlook is 2.7-2.8%, up from 2.5% earlier.
According to mobile phone vendors, smartphones, food delivery apps and marketing campaigns are expected to benefit from the recent cash handout.
Somchai Sittichaisrichart, managing director of mobile phone distributor SIS Distribution Plc, said the company’s smartphone sales increased by 200% for both Bangkok and upcountry during Sept 23-29. The best-selling brands were in the price range 3,000 to 5,000 baht.
Smartphones are now considered crucial devices for consumers, said Mr Somchai.
Adisak Sukumvitaya, chief executive of mobile phone retail chain Jay Mart, said from Sept 26 to Oct 2 smartphone demand at its stores grew by a double-digit rate from the normal period.
Smartphones priced less than 5,000 baht were popular in rural areas, while those priced more than 10,000 baht performed well in hypermarkets, he said.
Many customers buying phones priced more than 10,000 baht utilised payment instalment programmes, making a down payment of 20-30% of the phone’s price, with monthly payments of less than 1,000 baht, said Mr Adisak.
“We will prepare more inventory to capitalise on the high season in the final quarter, with future demand expected from the second phase of the cash handout scheme,” he said.
Yod Chinsupakul, chief executive of Line Man Wongnai, said in the last two weeks, the company has recorded more orders from users who were previously inactive, particularly in rural areas.
Ratthi Chatdamrongsak, chief commercial officer of Line Thailand, said marketers are increasing their spending on the platform, particularly for fast-moving consumer goods.
UNCERTAIN RESULT
The outcome of the cash handout remains unclear following reports that many recipients did not spend money buying products and services that would stimulate the stagnant economy, said Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI).
The government hopes the money will increase consumption, leading to manufacturers producing more products for sale, but many people spent some or all of the 10,000 baht to repay their debt, he said.
This raises doubts over whether the handout will effectively stimulate the economy, as expected by businesses, said Mr Kriengkrai.
“Members of the Joint Standing Committee on Commerce, Industry and Banking applauded the scheme because there were no other measures issued to increase economic activities, even during the previous government,” he said.
The delay in bolstering the domestic economy is partially blamed for keeping consumption static for more than a year, said Mr Kriengkrai.
As there are few strings attached to the first phase of the cash handout, it is hard to know how the money will be spent, he said.
However, Mr Kriengkrai said the FTI remains optimistic about the government allocation of stimulus to deal with the sluggish economy.
“It is acceptable to inject a huge amount of money into the economy, rather than keeping it in state coffers,” he said.
Mr Kriengkrai suggested the government target people with more purchasing power in the second phase.
“This group of people is willing to spend money. They will combine the handout with their money to strengthen their purchasing power,” he said.
PURCHASING UPTICK
Pornchai Thiraveja, director-general of the Fiscal Policy Office (FPO), said the first phase will definitely increase domestic purchasing power, which was affected by the pandemic and recent flooding in northern areas of the country.
The entire 145 billion baht for the first phase came from additional budgetary allocations and emergency reserves, putting money directly into the hands of citizens.
This cash injection should flow into the economy this year, said Mr Pornchai.
“Some of the handout may go towards repaying informal debts, which cannot be tracked, but this is estimated to be a small portion,” he said.
“The majority of the funds will likely be spent on daily living expenses. It is quite challenging to determine how many times this money will circulate in the economy.”
With the 14.5 million beneficiaries in the first phase low-income earners and disabled people, Mr Pornchai said these groups tend to have a high marginal propensity to consume (MPC), meaning they are likely to spend most of the additional income.
Data from the National Statistical Office indicates low-income groups have an MPC rate of 80%, meaning they spend 80 baht of every 100 baht earned, either saving or repaying debt with the remaining 20 baht.
He said the 145 billion baht distributed to vulnerable groups should mostly be spent, stimulating the economy nationwide.
The region with the most recipients in the first phase was the Northeast, followed by the North, South, and the Bangkok metropolitan area.
The top five provinces with the most beneficiaries were Nakhon Ratchasima with 540,000 people, Ubon Ratchathani 440,000, Si Sa Ket 400,000, Chiang Mai 390,000 and Buri Ram 370,000.
In contrast, the five provinces with the fewest recipients were Ranong with 27,000 people, Phuket 28,000, Trat 31,000, Samut Songkhram 33,000 and Phangnga 42,000.
The FPO said the data at the tambon level make it clear the handout was widely distributed across the nation, indicating the funds should have a broad stimulus effect.
Regarding the impact on economic growth this year and next, Mr Pornchai said the handout is expected to increase expansion by 0.35 percentage points.
The government initially expected GDP growth this year of 2.6-2.7%, excluding the stimulus scheme.
He said most of the funds are expected to enter the economy by the fourth quarter this year based on three supporting factors: purchasing power has not returned to pre-pandemic levels; recent floods in the North and other provinces require spending to support purchasing power and for daily necessities; and the approaching New Year holiday usually leads to spending on goods, equipment and clothing.
PALE EFFECT
While the first phase of the cash handout might benefit other sectors, the tourism industry expects to be left out, according to airline and hotel operators.
Santisuk Klongchaiya, chief executive of Thai AirAsia, said since the initial handout, the airline has felt minimal impact as people are spending this money on necessities, rather than travel.
Thienprasit Chaiyapatranun, president of the Thai Hotels Association, said hotels across all segments did not notice a major impact from the handout, with the spending going towards other expenses.
Mr Santisuk said if the government resumes the co-payment “We Travel Together” scheme, this programme would benefit the whole tourism industry more than the current stimulus.
He said it would encourage tourists to travel using government subsidies, as happened during previous phases of this scheme.
Mr Santisuk said the timing of each stimulus is critical to ensure a project is successful at improving the economy.
The tourism and sports minister proposed restarting the tourism subsidy next year during the low season, and Mr Santisuk agrees with the timing as demand usually flags in the second and third quarters.