BANGKOK (Reuters) -Thailand's 500 billion baht ($13.51 billion) "digital wallet" stimulus policy gained cabinet approval on Tuesday, Prime Minister Srettha Thavisin said, clearing another hurdle for the signature policy of the ruling Pheu Thai party.
The handout would give 10,000 baht ($270.20) to 50 million Thais to be spent in their local communities over a six-month period. It aims to spark growth in Southeast Asia's second-largest economy as it struggles with soaring household debt.
The scheme is expected to add 1.2 to 1.8 percentage points to economic growth in 2025, government spokesperson Chai Wacharonke told a media briefing.
Earlier this month, the government said the handout scheme would lift growth by 1.2 to 1.6 percentage points and help the economy expand by at least 5% next year.
The launch of the plan, Pheu Thai's key platform in the 2023 election, had been delayed to late 2024 due to a lack of funding and concerns about the impact on public debt.
The government said earlier this month it would finance the policy from the 2024 and 2025 budgets and use capital from the state-owned Bank for Agriculture and Agricultural Cooperatives.
It has rejected criticism from some economists and experts, including two former central bank governors, that the policy was fiscally irresponsible.
Academics and opponents have also questioned the legality of tapping into a state bank's coffers to finance the handout.
Deputy Finance Minister Julapun Amornvivat reaffirmed a fourth-quarter launch date for the policy, and said experts had been consulted on the legality of the plan.
"There will be stimulus in job creation, economic activity and investment," he added.
Thailand's economy unexpectedly shrank 0.6% in the final quarter of 2023 from the third, prompting the state planning agency to cut its 2024 growth outlook to between 2.2% and 3.2% from an earlier projection of 2.7% to 3.7%.
Growth in 2023 was 1.9%, slower than expected and less than 2.5% growth in 2022.
($1 = 37.0100 baht)