Policy implementation in 2011 Looking back at 2011, the BOT implemented our monetary policy to ensure stability against the backdrop of robust economic expansion in the first three quarters of the year. Thus, we continued to normalize the policy rate, as I had stated in last year’s policy statement. After the economy was hit hard by the flood crisis amid the stagnating global economy in the final quarter, the BOT policy was adapted to the changing circumstances, evidenced by the Monetary Policy Committee’s (MPC) decision to lower the policy rate in the last meeting of the year. Throughout last year, the BOT also paid particular attention to policies that facilitate businesses in normal times and in crisis times. These included policies that ensure the exchange rate movements consistent with the underlying economic fundamentals and that its volatility remained manageable by Thai businesses. Moreover, our policy on financial sector regulation and supervision has ensured that Thai financial institutions maintain their status as a credible and efficient financial intermediary and able to meet private sector demands. These efforts included encouraging financial institutions to rationalize their transaction fees structure, introducing digital cheque-imaging system, and relaxing certain measures related to financial institutions to alleviate financial burdens of flood-affected victims. Economic conditions and challenges for 2012 The path towards the future is not a smooth one. Ongoing challenges from the past and new challenges will increase obstacles for the Thai economy. Domestic issues still remain an important hurdle while emerging external issues have created new challenges.

These challenges are inherent parts of the mega trends, which include the crisis facing western economies and advancing regional economic integration. Currently, Thailand appears to be at a transitional gateway of these mega-trends, where the future looks blurry. The persistent economic slowdown plaguing the advanced economies of  BIS central bankers’ speeches  1  United States and Europe leading up to sovereign debt crisis and continued financial system stresses do not yet have a clear resolution in place. Many observers, however, view that after this transitional gateway, Asia will be under the spotlight with China as the new leader, leading the economic expansion for other countries in the region. Despite this optimism, countries in Asia cannot afford to relax, sit back, and enjoy the ride, as economic volatility could arise intermittently via trade and financial channels from western economies. The degree of such impact depends on how well each economy is prepared for the potential disruption. Another aspect of the transitional gateway is the ASEAN Economic Community (AEC) in 2015. This regional integration will bring not only changes in the regional investment and trade landscape, but also changes in people’s attitude as an ASEAN citizen where travel and contact will become more frequent. Nonetheless, we should not view AEC as the final destination, but rather a stepping stone towards enhancing economic resiliency in the region by creating a single ASEAN market and production base.