New tax deductions set to stimulate consumption in early 2024 receive government approval
The Thai cabinet has approved significant increases to the minimum wage, set to take effect in January, alongside new tax breaks intended to enhance consumer spending and the rollout of the second phase of the government’s handout scheme, according to Prime Minister Paetongtarn Shinawatra.
The government initially pledged to raise the nationwide minimum wage to 400 baht daily in an effort to bolster the economy.
However, a recent decision by the wage committee limited the 400 baht rate to select areas, including Phuket, Chachoengsao, Chon Buri, Rayong, and Koh Samui. In other regions, wages will see an average increase of 2%, ranging from 337 to 380 baht, up from the current levels of 330 to 370 baht.
Businesses expressed concerns over the feasibility of a 400-baht nationwide wage, citing diverse economic conditions across provinces.
The government has also sanctioned new tax deductions aimed at promoting consumer spending.
Deputy Finance Minister Julapun Amornvivat announced a tax deduction of up to 50,000 baht based on documented expenditures, excluding domestic travel. These tax incentives will be active from January 16 to February 28.
Furthermore, the cabinet has approved the second phase of the handout program, allocating 40 billion baht to support four million elderly citizens, with payments scheduled to begin in January.
The first phase of this initiative commenced in September, distributing 10,000 baht to approximately 14.5 million recipients, with a goal of reaching 45 million overall.
In related financial updates, the government anticipates a budget deficit of 860 billion baht for the fiscal year 2026, maintaining a similar outlook to the current year’s budget. Estimated spending stands at 3.78 trillion baht, as outlined in an official statement.
This budget proposal is based on projected economic growth of 2.3% to 3.3% and inflation rates of 0.7% to 1.7% for 2026.
Inflation target remains stable
Ministers have also confirmed that the official inflation target will remain unchanged for 2025, marking a substantial agreement between the central bank and the Ministry of Finance, aiming to sustain a target range of 1% to 3%, said Julapun.
This marks the fifth consecutive year that Thai authorities have aligned on maintaining this target range, despite actual inflation rates typically falling short due to high household debt impacting consumer expenditure.
The agreement reflects a calming of tensions between the central bank and the government amid debates over interest rates and strategies for economic revitalization.
The central bank opted not to lower borrowing costs last week, retaining the benchmark rate at 2.25%, indicating that the current neutral position is best suited for navigating global economic uncertainties.
Maintaining a moderate price range is crucial for equipping the central bank to address future economic challenges, particularly in light of potential trade impacts from new tariffs.
This year has seen inflation rates remain below the central bank’s target, averaging 0.3% over the first eleven months. However, projections indicate a rise to the lower end of the target range as inflation was recorded at 0.95% in November, marking a sixth consecutive month below the target.
The forecast suggests an average inflation rate of 1.1% for the upcoming year, as medium-term expectations remain aligned within the established target range, according to the Monetary Policy Committee’s recent insights.
