Nevertheless, the Thai banking system will be able to handle these challenges given a strong capital base as a result of continued profitability in the past ten years, a good risk management system, and strong risk-based supervision. Therefore, Thailand’s key fundamentals remain resilient in the face of these challenges. Most importantly, human resources and know-how remain intact. History shows that no matter how severe the natural disaster, roads can always be rebuilt and buildings restored in a relatively brief span of time should the human spirit remain, as it does in Thailand. The growth rates I have mentioned for 2012 and 2013 are consistent with the medium-term trend, as strong fundamentals mean that Thailand’s long-term growth trajectory remains intact despite the flood and volatile external environment. An important reason for this is  BIS central bankers’ speeches  1  that Thailand is well positioned geographically to reap the benefits of growth in Asia. The rise of China and the ASEAN Economic Community (AEC) provide enormous growth opportunities from economic integration. For sure, there will be more competition. But our research shows that trade gains will be substantial, from both inside and outside the region. However, there is a catch. To reap these gains, the Thai economy will have to undergo structural adjustment, that is, the flow of labor and capital from sunset to sunrise sectors. The exact form of adjustment is uncertain, as it depends on global developments.

These issues include a regulatory framework that promotes financial sector development without compromising financial sector stability, the optimal adoption of international standards for bank supervision, a level-playing field among different domestic financial players, and the competitiveness of the Thai financial system in the ASEAN context of Qualified ASEAN banks, and so on. Ladies and Gentlemen, I believe that the efforts put forth by the BOT will fulfill the objective of enhancing competitiveness and ensuring long-term macroeconomic and financial stability. However, we cannot do this alone, especially in a world of global economic uncertainty, domestic challenges and diminishing fiscal room. A common vision among all stakeholders is necessary for policy coordination. The advanced economies that are now experiencing public debt crisis offer valuable lessons for emerging countries as well as Thailand where planned fiscal spending will add to fiscal debt. I believe that at this crucial juncture, many countries, Thailand included, still have time to manage possible future fiscal stresses. Austerity by means of cutting public spending is one conventional way to achieve fiscal consolidation. However, most emerging and developing countries still require essential infrastructure investment to unleash their own growth potential. Austerity without growth would be futile. Therefore, what is needed is constructive fiscal consolidation rather than dogmatic austerity programs. Prudential cuts can be combined with infrastructure spending to raise competitiveness levels and ensure sustainable long-term growth. Rest assured that the BOT will do everything possible to create a stable long-term economic environment in which businesses can prosper. Thank you. BIS central bankers’ speeches  3