The Bank of Thailand has deployed accommodative monetary policies throughout these shocks, as has the government sector by deploying stimulating fiscal policy. Over the downturns during this period, Thailand’s economy has been maintaining strong fundamentals and stability, and thus allows policy makers to accommodate and boost the recoveries without much risk to future growth. The central bank actively takes part in building these strong fundamentals and stability. Ladies and Gentlemen, Now that we are on the same page about Thailand’s growth potential, I would like to turn your attention towards the present roles of the Central Bank in restoring growth through stabilization policies. The Thai economy is currently well below its growth potential. Particularly over the last 3 quarters, average growth is close to zero due to political uncertainty and payback period from earlier government policies, most notably the first-car buyer tax rebate scheme, which has dragged down private spending. A prolonged period of diminished economic activity eventually hurts growth potential. When businesses lose confidence, they draw down production and investment, which blocks progress in knowhow and technology. A steady growth path is desirable because growth stability helps the private sector make long-term decisions. This is why the monetary policy committee also takes a role in stimulating the economy towards regular activity. In this situation the monetary policy committee has taken a more accommodative stance since early this year to support the economy to reach its full level of activity faster without sacrificing the monetary policy objective of maintaining price stability.

Prasarn Trairatvorakul: Achieving Thailand’s true growth potentials – the role of the central bank Speech by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the Thailand Focus 2014: Reforming for Sustainable, Bangkok, 27 August 2014. *  *  *  Ladies and gentlemen, I am very honored and pleased to be addressing you at Thailand Focus once again. I would like to thank the Stock Exchange of Thailand, Phatra Securities and Bank of America Merrill Lynch for arranging what has become the must-attend forum on investment, policies, and the Thai economy. This year’s topic, potential growth, has gained new dimensions on the world stage since the Global Financial Crisis. Through harsh experience, advanced economies have learned that their long-term growth potentials may have been diminished by a protracted period of sub-par short-term growth. This idea of “secular stagnation” which went back to Alvin Hansen during the Great Depression and brought back to the spotlight last year by Larry Summers has now been widely discussed in the media as well as policy circles. While our situation is different from the West, Thailand has also been experiencing sub-par growth during most of the past seven years. As the economy now wakes up from the third contraction since 2008, it is natural to ponder about the economy’s growth going forward. Ladies and gentlemen, I am most pleased to have this talk with you today because the Bank of Thailand stands between short-term hiccups and Thailand’s long-term growth, bringing decades of experience in economic stabilization.