Against this background, my talk today will focus on three parts. First, I wish to discuss the progress of Thailand’s economic recovery and the importance of starting policy normalization. Second, I will highlight the four key strengths underlying our economic resiliency – the strengths which we can continue to improve. Third, I will focus on the medium-term issues that we must work to enhance so that the economy will become more resilient to external developments and increasing volatility. This time last year, we were highly uncertain as to when the global economy would bottom out, and whether there was danger of a double dip in the recovery. Today, we have already witnessed robust growth rates in Thailand and other Asian economies, starting the fourth quarter of 2009. This has been achieved notwithstanding the gradual recovery of the G3 economies, and financial market volatility following the European debt problem. Looking back at the downturn, fiscal spending played a very important role in cushioning and boosting up the economy. While external demand was still weak, we saw the surge in public sector spending to jump start the economy and avoid a potential downward spiral in domestic demand. But, once global economy is back on a recovery track, our exports have started to grow strongly, in particular, in electronics, electrical appliances, and vehicles. In fact, our export sector has already recovered to the pre-crisis level. As the growth momentum gained strength, domestic consumption started to pick up.

Exports of other commodities add to the vulnerability of our economy to terms of trade shocks.3 The total commodity-related share of exports has risen from less than 40 percent in 1978 to a good 65 percent in 2012. Rules-based fiscal policy We know that commodity producing countries tend to experience pronounced economic cycles. However, as noted by Jeffrey Frankel (2011)4, this can be reduced through wellchosen regimes for fiscal and monetary policy: “We need to set up regimes ex ante which are more likely to deliver the right result ex post, in a world inhabited by human beings, not angels.” In Norway, the act of parliament relating to the oil fund, passed in 1990, provided a new framework for fiscal policy. The policy guidelines were clarified in 2001, and rules governing the interaction between Norway’s petroleum wealth and fiscal policy were established. These rules state: Chart: The Government Pension Fund Global and the fiscal rule  2  For more information about the Norwegian petroleum sector, see “Facts 2012: The Norwegian petroleum sector”, Ministry of Petroleum and Energy, http://www.regjeringen.no/en/dep/oed/documents-andpublications/Reports/2012/facts-2012-the-norwegian-petroleum-secto.html?id=714606. 3  Using a factor-augmented vector autoregressive (FAVAR) model that allows them to distinguish between different groups of countries, Aastveit et. al (2012) find that demand from emerging economies (most notably from Asian countries) is more than twice as important as demand from developed countries in accounting for the fluctuations in the real price of oil and in oil production. See Aastveit, Knut Are, Hilde C. Bjørnland and Leif Anders Thorsrud (2012): “What drives oil prices?