(Bloomberg) — Thailand is working on a supplementary budget that aims to increase state spending by as much as 122 billion baht ($3.4 billion). Srettha Thavisin is moving ahead with a plan to stimulate the country’s economy through a cash handout.
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The extra money will fund the government’s so-called digital wallet program, which will see about 50 million Thais receive 10,000 baht each in the fourth quarter, Finance Minister Pichai Chunhavajira said. The details of the additional spending will be submitted to the Cabinet on May 28 once the relevant agencies have finalized it, he told reporters on Tuesday.
Srettha’s government has pledged to support Southeast Asia’s second-largest economy through the controversial cash handout, which is criticized by the central bank and the opposition as inflationary and a risk to fiscal consolidation. Pichai said the stimulus measures will help boost growth after GDP growth in the first quarter lagged the performance of its regional peers by 1.5%.
“We avoided a technical recession in the first quarter, but our economic growth for the quarter and the full year is lower than that of neighboring countries,” Pichai said. “This underlines the need for the government to find ways to stimulate growth.”
The government has opted to increase budget spending on the cash stimulus instead of reforming existing spending proposals to avoid delays in government spending, Pichai said.
The Cabinet had previously approved a plan to finance the 500 billion baht through budget allocations and a loan from the State Bank for Agriculture and Agricultural Cooperatives. It has also greenlighted a wider budget deficit for next fiscal year to partially finance the disbursement.
The new spending proposal comes on top of the 3.48 trillion baht budget for the fiscal year that started on October 1 and will widen the budget deficit of 693 billion baht, or 3.6% of gross domestic product, said Deputy Finance Minister Paopoom Rojanaskul . . The supplementary budget is “the best way” to mobilize the 175 billion baht needed from the current budget for the so-called digital wallet, he said.
The yield on ten-year government bonds rose by four basis points to 2.787%, the highest level since December 13.
Paopoom said the additional budget is unlikely to hurt the domestic bond market as the government will spread the loans over a few years as the stores and merchants participating in the digital wallet plan will not make a lump sum payment.
Deputy Finance Minister Julapun Amornvivat said additional budget expenditures will be mainly financed through a larger budget deficit and additional revenue collection.
–With help from Pathom Sangwongwanich and Marcus Wong.
(Updates with more comments on financing in the last paragraph.)
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