The accommodative stance has been maintained until now and is starting to bear fruit as political clarity resuscitates confidence from both domestic and international stakeholders. Given that balance sheets are healthy enough to resume normal activity, regained confidence of economic agents is the key to recovery and return to the existing growth potential. The most recent economic data shows that consumption and investment have started to recover in line with progression of political clarity and accelerated government disbursement. At the same time, world economic growth which continues to recover steadily, especially in the U.S., will help export recovery. With all these positive developments, prospect of growth recovery is promising. In fact, we project the economy to grow at around 5% over the next 4 quarters. Once again, in this situation, the monetary policy committee needs to weigh the gain of shortterm boost to growth with the risk of financial instability that can deter future growth. Besides price stability, financial stability is also a necessary component of healthy growth potential. Financial instability can spread to and disrupt the real economy as seen in the recent economic development of industrial countries over the past decade. What methods does Bank of Thailand have to maintain financial stability? Monetary policy’s priority is maintaining inflation expectations within the target range. As a tool against 2  BIS central bankers’ speeches  financial imbalance, monetary policy is blunt and can create costs to sectors that are not at risk. Macroprudential tools can complement monetary policy by acting on specific high-risk sectors.

When China became a member of the World Trade Organization in 2001, its foreign trade was 30 percent of that of the US. The Chinese economy has since grown at an unprecedented pace. In 2013, China overtook the US as the world’s largest trading nation. Ample labour supply and low cost levels have given China and the other emerging economies of Asia strong competitive advantages in international markets. BIS central bankers’ speeches  1  The global flow of credit over the past 15 years has taken an untraditional direction – from relatively poor countries with strong economic growth to more prosperous, mature economies experiencing lower growth. For a long period, this shift contributed to substantial imbalances in the global economy. Ample supply of credit in western economies pushed down borrowing rates. Facing competition from Asia, it became relatively less profitable for firms in the west to invest in new productive capacity in their home countries. Instead, cheap credit was widely used to finance consumption and housing, particularly in the US and Europe. Banks and financial institutions were, in practice, free to fuel credit growth. In retrospect, it is clear that a vast amount of capital was squandered. Many businesses and a number of countries are struggling with high debt levels. Governments that ran economies on cheap credit are now paying a high price in the form of austerity measures and unemployment. In parts of Europe, unfinished infrastructure and empty buildings are not uncommon sights.