The robust recovery momentum on the global scale has resulted in a strong expansion of Thai exports across product categories and export destinations. In addition, the Thai tourism sector has grown consistently with steady increases in the number and quality of tourists. Therefore, it is not surprising to see businesses associated with exports of goods and services enjoying the benefits from the improved external demand. Domestic demand growth, however, is still proceeding at a gradual pace. Despite a continuous recovery, private consumption growth remains well below that of GDP, registering within the 3 percent range. And until recently, private investment growth had concentrated mainly in the export sector. Overall, the large current account surplus of 10.5 percent to GDP last year summarizes the pattern of economic recovery and reflects the imbalance between the external and domestic demand. Second, the rural economy has been exposed to more adverse shocks than its urban counterpart. Specifically, several populist measures including the controversial rice pledging scheme were withdrawn, together with adverse weather conditions such as severe droughts in 2016 and floods in 2017 as well as declines in global prices of key export crops especially rubber and rice, all constituted negative income shocks to farmers. In addition, rural entrepreneurs, which are mostly SMEs, tend to be less 2/10  productive and might not be able to compete with larger firms who are better equipped with capital and technologies.

Nevertheless, the vast expansion of the financial sector would not have been possible without both supportive macroeconomic conditions and inadequate prudential regulation. Global current account imbalances have generated large financial flows, as large developed countries sucked in massive capital flows from oil exporting and emerging economies. BIS Review 59/2010  1  Seemingly bright macroeconomic prospects combined with deregulation and global conditions of over-extended credit. The crisis has shown that deregulation does not always pave the way for greater efficiency and greater prosperity. Rather we have rediscovered the value of properly functioning regulatory and supervisory institutions. And we have also rediscovered the value of mediumterm orientation, sustainability and stability. Consequences of the financial crisis The consequences to be drawn to minimise the risk of a comparable crisis in the future are numerous and wide-ranging. First, comprehensive regulatory reforms of the financial system have to be implemented with top priority. While some progress has been already made, major challenges lie ahead. Most importantly, the pro-cyclicality of the financial system must be mitigated. It is essential to change regulatory and accounting rules that tend to amplify the natural cyclical swings of our economies. Second, we have to enhance the transparency of financial structures. That concerns rules of disclosure as well as market infrastructure. In particular, derivative market instruments need to be subject to greater transparency. But, beyond changes in financial governance, there needs to be a deeper economic assessment of the benefits of these structures to society. Third, incentives should be aligned.