Prasarn Trairatvorakul: Bank of Thailand’s policy direction in 2013 Speech by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the Bank of Thailand, Bangkok, 22 January 2013. *  *  *  Honourable guests and members of the press, Thank you all for attending this annual event, in which I would like to outline the Bank of Thailand (BOT)’s policy direction in 2013. Throughout history, our country might at times be faced with economic challenges and obstacles of different nature and severity, but the BOT’s mission and resolve to safeguard Thailand’s economic and financial stability has remained unchanged since its birth over 70 years go. Today our country is moving into an era of ever-closer linkages, whose scope extends well beyond the technology and communication dimension. It involves regional economic integration, not least among neighbouring countries or what is collectively known as the CLMV area. Within our country itself, the volume of cross-provincial trade and the number of SMEs outside the capital have grown, suggesting that growth has been increasingly inclusive. On the other hand, the greater economic interdependence brought about by closer trade and financial integration could also be a source of systemic risk, if an imbalance, however small, was allowed to develop unchecked. The BOT, as one of the nation’s key policy makers, strives to foster a sound and stable economic environment that enables the private sector not only to grow, but also to retain sufficient resilience and flexibility to withstand competition and uncertainties.

[7] We have also seen firms react to the threat of shortages by ordering more and earlier than usual, which has in turn pushed up inflation along the pricing chain, a phenomenon known as the “bullwhip effect”. [8]  Chart 2 Decomposition of HICP inflation excluding energy and food (annual percentage changes and percentage points contributions)  Sources: Eurostat and ECB calculations. See Gonçalves, E. and Koester, G. (2022), “The role of demand and supply in underlying inflation – decomposing HICPX inflation into components”. Notes: Items affected by supply disruptions and bottlenecks comprise new motor cars, second-hand motor cars, spare parts and accessories for personal transport equipment, and household furnishings and equipment (including major household appliances). Items affected by the reopening of the economy comprise clothing and footwear, recreation and culture, recreation services, hotels/motels, and domestic and international flights. The latest observations are for October 2022 (flash) for HICPX and September 2022 for the rest. The nature of the shocks has also been blurred on the labour market side by governments’ policy response to the pandemic. It has shielded employment from swings in demand through job retention schemes. [9] And it has led to an increase in public sector employment (Chart 3), especially in healthcare and education. [10]  Chart 3 Euro area employment across sectors (index: Q4 2019 = 100)  Source: ECB staff calculations based on Eurostat data. Note: The latest observations are for the first quarter of 2022. As a result, the output and unemployment gaps are giving different signals today.