Cash handouts: Boon or bane for Thailand’s long-term growth?


Economists warn that populist policies may create dependence and hinder the country’s goal of becoming a high-income nation

Economic experts recently warned that the government’s cash handout policies, aimed at lifting people above the poverty line, could negatively impact Thailand’s financial status in the long term.

Thailand has remained at the “developing” country level since it was rated by the World Bank in 1988. The country’s GDP per capita, a key development indicator, sits at around US$6,900 or 230,000 baht – more than 50% less than the $15,000 or 500,000 baht per annum required to achieve high-income status.

To achieve this, the Thai economy must expand by 10% year on year. However, its economic growth has stagnated, averaging only 1.5% in the first quarter of this year.

Economic experts argue that government spending on tax cuts and cash handouts, while popular, generates a cycle of dependence. These policies, they say, address poverty issues immediately, but do not equip beneficiaries with skills or opportunities to generate income in the long term.

Athiphat Muthitacharoen, a lecturer at Chulalongkorn University’s Faculty of Economics, pointed to Thailand’s long-standing budget deficit, fuelled by populist policies since 2004. Citing data from the Fiscal Policy Office and Public Debt Management Office, he said government revenue in 2023 barely covered regular expenses and debt repayment.

“Almost 70% of the government’s expenses are difficult to cut, such as state welfare [12.5%], welfare for government personnel [16.2%], salary and compensation [25.7%] and debt repayment [12.8%],” he said.

Kobsak Pootrakool, president of the Federation of Thai Capital Market Organisation, echoed these concerns. Questioning the effectiveness of cash handouts, he said they are short-term policies that impact the Thai economy and can trigger distortion in social equality.

He also refuted the government’s claim that cash handouts reduced the number of poor households from 4 million in 2007 to 1.5 million in 2021, saying that the number of people below the poverty line will remain unchanged once government aid is removed.

He also pointed out that the 2.5 million households that have allegedly been pulled out of poverty are mostly reliant on government aid.

“In other words, for these households, government aid accounts for more than half their total income,” he said.

Kobsak said he expects Thailand’s financial status to fall further if these policies continue, warning that the government may have to increase handouts further to maintain a satisfactory poverty reduction level.