Jakarta, CNBC Indonesia – RI's neighbors are noisy because of social assistance (bansos). This makes the Prime Minister (PM) And The Central Bank Governor disagreed.
This happened in Thailand, between PM Srettha Thavisin and Sethaput Suthiwartnarueput. Providing social assistance via the latest digital wallet is making things hot.
Srettha said that “the people are suffering” and high interest rates are hurting the economy. He urged parliament to approve a plan to provide one-time social assistance payments of 10,000 baht (Rp. 4.4 million) to around 50 million low-income residents via digital wallets.
“This aid is needed to spur spending, support businesses and jump-start economic recovery,” Thavisin wrote Financial Times Tuesday (6/2/2024).
However, Sethaput rejected this. He argued that there was no crisis and criticized Srettha's digital wallet social assistance and “short-term” stimulus policies.
“This is one of the few world leaders who is trying to convince the public that current economic conditions are worse,” said Peter Mumford, head of the Eurasia Group for Southeast Asia, published on the same page.
“The Prime Minister and the central bank are at odds over the future of digital wallet policy making it very difficult for anyone trying to predict what is happening to the economy,” he explained.
The dispute underscores Thailand's precarious position in its efforts to emerge from the pandemic-induced doldrums. The government, which is targeting annual growth of 5% over the next four years, said last month that the economy would grow only 1.8% in 2023, lower than the central bank's previous forecast of 2.5 to 3%.
Growth has lagged other countries in the region and consumer prices have contracted for four consecutive months, falling 1.1 percent in January.
But the central bank, which held its first rate-setting meeting of the year on Wednesday, has kept its policy rate at its highest level in a decade, 2.5%, citing anticipated increases in tourism and spending this year.
For Srettha, a former real estate magnate who also served as finance minister, the digital wallet is central to the Pheu Thai party's efforts to improve Thailand's fortunes after it finished second in last year's election.
Pheu Thai left the anticipated coalition with Move Forward, which was the ultimate winner, because of Move Forward's promise to reform Thailand's military and monarchy.
Instead, they made a deal with their enemies, the military-backed Move Forward, which has ruled the country since a coup in 2014.
“Srettha came to power promising faster economic growth, so to some extent the legitimacy of his government depended on his success or luck,” Mumford added.
“Digital wallets are the flagship policy to achieve this,” he said.
However, the launch of this digital wallet social assistance was plagued by questions about how to pay for it and its launch. It is known that the launch was originally scheduled for February, but has been postponed to May or later.
Critics argue that large fiscal injections like these digital wallets are irresponsible. DBS, a bank from Singapore, estimates that funding digital aid through loans could push the government's deficit to more than 5% in the 2024 fiscal year.
Srettha repeated his call for the central bank to lower interest rates on Tuesday, saying a cut of 0.25 percentage points would not trigger inflation. But analysts say the central bank is on the right track.
“The central bank, which is also grappling with challenges such as household debt rising to 90% of gross domestic product last year, has been preemptive in its efforts to curb inflation,” said Siddharth Mathur, head of macro at BNP Paribas.
Even so, Fitch Ratings estimates that growth in 2024 of 3.8% could increase to 4.5% if there is support from this digital wallet.
“Thailand's economy has not fully recovered from the pandemic shock but is currently considered to be at its lowest point,” said Fitch analyst George Xu.
[Gambas:Video CNBC]
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