Citi, Nomura See Risk to Thai Cash Handout on Political Turmoil

Thomas Kutty Abraham
·2-min read

(Bloomberg) -- Rising Thai political uncertainty poses significant risks to Prime Minister Srettha Thavisin’s plan for a $13.6 billion cash handout to stimulate Southeast Asia’s second-largest economy, according to Citigroup Inc. and Nomura Holdings Inc.

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Recent legal cases against Srettha and former leader Thaksin Shinawatra suggest that Thailand is facing a fresh bout of political unrest that could potentially put some economic policies on the back-burner, Citigroup economist Nalin Chutchotitham wrote in a note. The bank’s base case scenario assumes no implementation of the so-called digital wallet scheme for now, he said.

Both Nomura and Citigroup see Srettha’s administration facing challenges to funding the handout that promises 50 million Thais 10,000 baht each targeted for rollout from the fourth quarter of this year. A plan to pass a $3.3 billion supplementary budget to partly finance the cash stimulus faces uncertainty in the parliament as some lawmakers remain lukewarm to the idea, Nalin said.

The cash handout was the centerpiece of Srettha’s strategy to lift the economy out of a decade-long, sub-2% economic growth.

“We see significant uncertainty around whether the supplementary budget bill will be passed, not only because of time constraints” but more importantly, that recent developments have significantly raised political risk, Nomura economists Charnon Boonnuch, Euben Paracuelles, and Nathan Sribalasundaram wrote in a note Friday.

Thailand was hit by a new phase of political turbulence after the Constitutional Court last week decided to scrutinize whether Srettha breached ethics by appointing a cabinet minister with criminal record. Prosecutors this week decided to indict Thaksin, the de facto leader of the ruling Pheu Thai party, on royal insult charges.

There’s a risk that Srettha could be removed from his post and the cabinet is dissolved as a result, with coalition partners forced to renegotiate terms of their alliance, creating a degree of political uncertainty, according to Citigroup.

“While the legal cases are still unfolding and the political situation remains in flux, there are risks that some economic measures could be put on the back-burner,” Citigroup said as it lowered its base case budget deficit to 3.2% of gross domestic product in fiscal year 2024 from prior estimate of 3.5%. It also revised down the fiscal gap outlook next year to 3.7% from 4.1%.

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