The analyst sees little impact from the digital wallet

The government’s flagship digital wallet policy could boost the economy by just 0.4 percentage points, mostly in 2025, after the project’s budget was cut by 50 billion baht to 450 billion as uncertainties remain over funding, according to an analyst.

The government subcommittee overseeing the 10,000 baht digital aid scheme decided to cut the program’s funding to 450 billion baht after legal complications prevented it from using the state-owned Bank for Agriculture and Agricultural Cooperatives, relying instead on the 2024 budgets and 2025.

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

According to BofA, a unit of Bank of America, project financing will consist of 122 billion baht from the 2023/24 supplementary budget, 43 billion from the Contingency Fund or 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 result, only 274 billion baht of policy would be financed by new deficits, while the remainder would be financed by budget cuts, although this has not been finalized,” wrote Pipat Luengnaruemitchai, emerging Asia economist at Kiatnakin Phatra Securities. 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 Prime Minister is scheduled to give full details of the program on July 24, after which the Finance Ministry is expected to send it to the Cabinet for approval on July 30.

“It is possible that the program will be reduced further as it remains unclear whether 132 billion baht of funds can be found from other budgets in the 2024/25 fiscal year, as the budget bill is already under parliamentary scrutiny. many negotiations”, said Mr. Pipat.

However, he said there is still 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 payments system, rather than an existing app and payments infrastructure.

“It may be a challenge for the 50 million people on board to start the program within this year, as the government expects,” Mr Pipat said.

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