The prime minister, who is also concurrently serving as Thailand’s finance chief, has sought to relieve debt and reduce energy costs. His party’s main promise – of handing out 10,000 baht (US$275) each to Thai citizens aged 16 and above at an estimated cost of 560 billion baht to the government – has been causing anxiety for many investors, with Thailand’s former central bank chiefs among those clamouring for Srettha to drop the plan.

Where the funds will come from is the main problem. Bangkok has said that it will raise its borrowing by 8 per cent for the current financial year that began this month, and the budget deficit is likely to hit 693 billion baht as spending is projected at 3.48 trillion baht.

Given the planned allocation, the public debt to gross domestic product (GDP) ratio, a metric that assesses a state’s ability to pay back its debt, would be at 64 per cent, higher than its typical 60 per cent ceiling, according to the Thai government.

“Even though the situation looks better in the short term … people still have doubts about what the government has to do next – how to induce foreign direct investment back to Thailand,” said Tanawat Ruenbanterng, head of research at Bangkok-based Tisco Securities.

“Through this handout, the government is betting on boosting the economy, but this project requires consumers to spend the money within six months, and after that, what’s next?” Tanawat said.

“The general view of the market is that the plan may be a short-term solution, and that is why foreign investors have been cautious about Thailand.”

Land of smiles: Hongkongers flock to Thailand to snap up cheap flats

As for measures to boost the property market, Tanawat said he expects Srettha to be prudent in helping the segment, given that it could be deemed as favouring his former industry.

On the other hand, infrastructure projects that would have a long-term impact on boosting the economy and benefiting the property market would have been a better bet for the government, Tanawat said.

Foreigners could be considered as playing an outsize role in the local economy. For instance, in 2019, international tourists contributed 11.5 per cent of the country’s GDP, according to S&P.

Foreigners also accounted for a quarter of all property sales in Thailand, with Hong Kong-based buyers contributing as much as a third of all purchases from 2018 to 2022, according to official data. The real estate sector contributed about 10 per cent of economic output in 2022, according to a study in May by the Bank of Ayudhya, Thailand’s fifth-largest bank in terms of assets, loans and deposits.

Chinese investors ready to scoop up ‘better value’ Thailand property

High levels of household debt, as well as Thailand’s ageing society and Bangkok’s shrinking population, have contributed to the slowdown, even as foreign buyers have largely returned to the market, according to the report.

In the first half of the year, foreign homebuyers bought 7,338 flats worth 35.2 billion baht, representing an increase of about 66 per cent and 58 per cent, respectively, over the previous year, according to official data.

Units bought by foreigners accounted for almost 15 per cent of the total volume and about a quarter of the aggregate value for all flat sales in the period, up by nearly 11 per cent and 20.5 per cent, respectively, from a year ago.

Chinese eye Thai properties to hedge against economic issues at home

Buyers from Hong Kong and mainland China accounted for 3,488 of the units bought, amounting to about 17 billion baht in the period, according to the data.

“The government’s announcement of several policies is expected to have a positive impact on the property sector,” said Chotika Tungsirisurp, head of research and consulting at CBRE Thailand. “Visa-free travel for Chinese and Kazakhstan nationals is likely to increase tourist arrivals from these countries, benefiting not only the hotel sector but also retail industries and potentially the residential sales market.

“If the 10,000 baht payment to all Thai nationals is implemented, it should benefit local retail businesses nationwide.”

Although it remains to be seen which of the measures will be prioritised, Chotika said the government’s focus on stimulating the economy is “generally a positive sign” for the residential market.