Will Thailand's digital wallet scheme rev up the economy?

But will this cash injection actually boost the economy, or simply fizzle out leaving a huge public debt for taxpayers?

According to the World Bank, the answer hinges on one key question: how much will people spend?

International studies cited by the bank suggest that the impact of such “helicopter money” depends on two main factors:

Liquidity crunch: Are people strapped for cash? If so, they're more likely to spend every penny, jolting the local economy. In Thailand, official data indicates around half of households live paycheque to paycheque, so there's a good chance the money will get splashed around the local markets.

Local content: Where will people spend? Ideally, they'll choose locally produced goods and services, giving businesses a much-needed shot in the arm. In Thailand, the digital wallet scheme’s six-month spending limit and location restrictions encourage this, keeping the money circulating within communities.

So, what can we expect?

Experts estimate that spending stimulus schemes like the digital wallet raise GDP by 0.33 to 0.6 in the short term. In simpler terms, for every 1 baht someone gets, the local economy could grow by 33 to 60 satang. This might not sound like much, but it can add up quickly, especially with 76% of the Thai population receiving the cash.

Of course, there are hurdles:

Vendor enrolment: Getting enough local businesses signed up for the digital wallet system could be a challenge.

Digital divide: Not everyone is tech-savvy, so ensuring fair access and usage of the digital wallet scheme will be crucial.

Inflation risk: A sudden spending surge could push up prices, requiring careful monitoring by the central bank.

The World Bank also cautions that the digital wallet scheme, which will cost an estimated 500 billion baht or 2.7% of GDP, could push public debt up to 65-56% – approaching levels seen during the COVID-19 crisis.

Despite these challenges, the potential rewards are promising, according to the bank. If implemented well, the digital wallet scheme could offer a much-needed boost to local economies, particularly in remote areas with high informal work. It's an experiment that the world will be watching closely, as its success could inspire similar initiatives elsewhere.

The digital wallet scheme is due to launch on May 1.