BANGKOK: There is disagreement between those backing the Thai government's digital wallet scheme and those opposed to it on whether the country is in an economic crisis to warrant the stimulus measure.
Amid these varying interpretations, it might be a prudent move to evaluate the present situation based on the seven assessments of the World Bank in defining an economic crisis.
The governnent's controversial policy of distributing 10,000 baht through a digital wallet to citizens aged 16 and above for the moment must return to the drawing table after the Council of State threw cold water on the proposed scheme.
The state's legal adviser opined that the government needed to prove the urgency and continuous efforts to resolve the national "crisis", as stated in Article 53 of the Monetary and Fiscal Discipline Act to be able to follow its current course of action.
Therefore, it becomes the responsibility of relevant agencies to consider whether this scheme meets the conditions, or not. The 12th Committee on Economic Theory has advised the government to consult relevant agencies and rely on economic data for confirmation.
The key question hounding the digital wallet policy is whether the country's economy is in a crisis or not. It is evident that from the government's perspective and economists supporting it that the economy is in a crisis. However, the opposing side, or agencies monitoring the economic situation, argue that the Thai economy continues to expand and therefore could not be considered to be in crisis.
On the global stage, when a country faces an economic crisis, there's usually no debate on whether it is a crisis or not. For instance, the 1997 "Tom Yum Kung", or hamburger crisis, and the Covid-19 crisis were universally acknowledged, requiring government intervention in the form of loan agreements to address these crises.
World Bank criteria
Dr Montri Soktiyanurak, the director of the management science programme for senior executives at the National Institute of Development Administration (NIDA), argued that the Thai economy is recovering from the Covid-19 pandemic.
The economy is gradually expanding. Economists from the National Economic and Social Development Council and the Bank of Thailand state that it is not a crisis. However, the government considers the slow economic expansion and high public debt as indicative of a crisis.
The definition of an "economic crisis" is legal as per the Constitution and financial discipline laws. Legislation for loans or additional financial regulations by the government can be taken recourse to only during urgent crises that need immediate resolution and are unavoidable.
While people may have differing perspectives on what constitues an economic crisis, the World Bank, an organisation tracking global economic conditions, has set criteria to identify if an economy might face problems. The 7 criteria:
Financial institution crisis: Continuous bank collapses, as seen in Thailand in 1997, leading to a financial crisis that affects various sectors of the economy.
Low international reserves: International reserves below the World Bank's standard of 4.5 times the monthly import value. Thailand currently ranks 11th globally in reserves, indicating stability.
High inflation: Inflation levels above 40% per month or an increase of over 5 times in a year. Thailand's current inflation stands at 1.5%, considered normal.
Currency devaluation: A severe and sudden currency devaluation like Thailand experienced before 1997. Thailand's currency has relatively low volatility, at around 6-7%.
High public debt: Currently at 62% of the gross domestic product (GDP), below the 70% ceiling specified.
Chronic budget deficit: Thailand's deficit is within the 20% limit prescribed by the World Bank, with occasional deficits reaching 30%.
Consecutive economic contractions: Two consecutive quarters of negative growth, which Thailand has managed to avoid.
Dr Montri emphasised that determining whether an economy is in a crisis or not necessitates adhering to standardised criteria like those provided by the World Bank. This approach can unequivocally judge if Thailand's economy is in a crisis without internal disputes. - The Nation/ANN
