Thailand's Cash Handouts Delayed, Signaling Pushback on Multiple Fronts

When Srettha Thavisin became prime minister of Thailand in August, many in the foreign business community expressed mixed emotions. On one hand, the former real estate tycoon appeared to be a safe pair of hands to guide the Thai economy out of its post-pandemic slump. Srettha also represents the Pheu Thai Party of former Prime Minister Thaksin Shinawatra, a leader who instituted a series of pro-business policies in the mid-2000s, such as simplifying licensing and permitting, promoting free trade, and encouraging privatization. In September, the new prime minister set off on a tour of the United States to court foreign investors in advanced industries.

However, Srettha also promised a series of populist measures that worried investors, including sharp increases in the minimum wage, debt suspension for farmers, and cash handouts for every adult citizen. Financial regulators and business chambers cautioned that implementing expensive populist measures could erode trust in Thailand's economic and financial stability, potentially deterring investors. Last week's announcement that the government will delay and downsize its cash handout initiative is the result of significant pushback on several fronts, including the opposition Move Forward Party, good governance activists and the business community. It will be important for foreign investors to monitor the progress of the prime minister's populist agenda, and whether it stimulates the economy as intended or undermines fiscal stability.