BANGKOK (Reuters) - Thailand's government on Wednesday launched the first phase of its flagship $14 billion stimulus handout scheme, which will eventually see an estimated 45 million people receive 10,000 baht each, saying it would spark economic activity.

The initial phase will see 10,000 baht distributed in cash to 14.5 million welfare card holders and disabled people, and is expected to be complete by the end of the month.

"Cash will be put into the hands of Thais and create a tornado of spending," Prime Minister Paetongtarn Shinawatra said at an event to mark the programme's start.

The "digital wallet" scheme was initially structured to distribute the funds through a smartphone app, with the money to be spent in local communities within six months.

"There will be more stimulus measures and we will move forward with the digital wallet policy," said Paetongtarn.

The scheme has been criticised by economists, including two former central bank governors, as fiscally irresponsible. The government rejects that, but has struggled to find sources of funding.

Southeast Asia's second-largest economy is expected to grow 2.6% this year after an expansion of 1.9%, behind regional peers.

($1 = 32.61 baht)

(Reporting by Chayut Setboonsarng and Panarat Thepgumpanat, Editing by John Mair)