One of the factors resulting in more difficult financing conditions for emerging economies with structural problems was the announcement by the US Federal Reserve that it intended to reduce its securities purchases. Overall, growth in the global economy in 2013 was weak and uneven, and remained marked by uncertainty. Will this situation change in the current year? Probably only to a limited extent. According to our assessment, although the cycle has probably bottomed out, the challenges remain formidable. I will now outline the international economic position in more detail. BIS central bankers’ speeches  1  Global economic outlook for 2014 In 2014, growth in the global economy is likely to be stronger than in 2013. Nevertheless, regional differences will remain substantial. While relatively robust growth can be expected in the US, the signs are pointing to a modest and uneven recovery in the euro area. A slightly stronger economic momentum than in 2013 can be expected in the major emerging economies, but they will not attain former growth rates. We therefore anticipate that expansion in the global economy will be no more than moderate. However, the recovery remains subject to significant downside risks. This is still largely due to the European debt crisis. You may be wondering whether the debt crisis is not already over. The extreme risks have indeed been eliminated. Reform programmes introduced in some euro area countries, progress achieved in creating a banking union and measures taken by the European Central Bank (ECB) have clearly brought about an alleviation of the crisis.

The Bank of Thailand’s role Ladies and gentlemen, This leads us to the second part of my talk this evening. Although short-term volatility has often caught us by surprise, there is a pressing need to consider longer-term issues. And to support long-term perspective, the Bank of Thailand has set economic and financial environment to support such goal. The Bank of Thailand always attempts to strike the right balance between economic growth and macroeconomic stability. Monetary policy decision via interest rate setting has always been made while taking into consideration growth, inflation and financial stability dimensions. However, there are limitations that monetary policy cannot achieve. A single instrument, namely, the policy interest rate cannot target multiple objectives such as price stability, financial imbalances, exchange rate and capital flow simultaneously. The policy choices inevitably involve trade-offs between different objectives. Policymakers will have to weigh carefully the costs and benefits of a policy decision. 2  BIS central bankers’ speeches  Although exchange rate is not the Bank of Thailand’s main policy tool, or an intermediate policy target, sharp exchange rate volatility can have significant impact on exporters and small businesses with less capacity to adjust. The Bank of Thailand, therefore, constantly monitors the impact of baht movement on the overall economy and stands ready to use policy instruments to prevent and manage dysfunctional market conditions and excessive speculation. Nevertheless, in the long-run, exchange rate should be determined by market mechanism and serve as an important price signal and catalyst for structural changes.