Prasarn Trairatvorakul: Growth, sustainability and inclusiveness – Thailand’s key success factors Dinner talk by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the Japanese Chamber of Commerce (JCC), Bangkok, 23 March 2011. *  *  *  Ladies and Gentlemen, Let me begin by extending my deepest condolence to the Japanese business community in Thailand on the immense losses caused by the unprecedented earthquake and tsunami in Japan. Despite the tragic incidents, I am confident that the strength and determination of Japanese people, together with supports from all around the world, will enable Japan to recover swiftly. For today, I would like to thank the Japanese Chamber of Commerce for inviting me to share with the distinguished audience my assessment of the Thai economy. I also look forward to hearing your views and concerns regarding the economic prospects. Needless to say that Japan and Thailand have a long history of close economic relationship, with Japan being the top foreign investor in Thailand. As such, Thailand has become a production hub for several Japanese industries, including vehicles, electronics and electrical appliances. I therefore hope that our discussion today will help align understanding and further strengthen the partnership between our two economies. For my presentation this evening, I would like to offer my assessment of the economy based on what I see as the three most important attributes that determine the economic progress for Thailand – the “key success factors”, if you will. First is that growth must be sustainable.

Inflation averaged 2.6 percent over the past decade, or about half of the 5.1 percent average rate during the 1990s prior to the  BIS central bankers’ speeches  1  Asian Crisis1. Meanwhile, our unemployment rate has been low at around 1 percent. The banking sector, severely affected by the 1997 crisis, has been safe and sound, minimally affected by the global financial crisis ten years later as a result of strengthened risk management and governance. Despite ongoing net capital inflows into Thailand, there appears no sign of asset price bubble while the degrees of leverage in the corporate and household sector are still low. Overall, I believe that the Thai economic stability has strengthened continuously. This achievement has been attributable to sound fiscal and monetary policy, together with appropriate and market-friendly regulations, aimed at keeping the economy operating close to its potential. Suffice it to say that the Bank of Thailand has fulfilled our responsibility to help achieve the economic stability. Under the inflation-targeting framework, the policy interest rate is the main instrument used to influence saving and spending in the economy so that demand matches potential supply. This economic balance has, in turn, produced a low and stable inflation environment necessary for the sustainable growth. In addition to the interest rate tool, the central bank also has regulatory tools to prevent undesirable accumulation of financial imbalances. Indeed, the so-called “macro-prudential policy” has been used as a complementary policy tool to the interest rate policy long before the sub-prime crisis.