Bank of Thailand has experience in employing several macroprudential tools since 2002 to prevent financial instability that may stem from, for example, excessive credit card loans to sub-par debtors, excessive foreign exchange speculation, and a formation of real estate bubble. I would like to refer to another of our policies to maintain financial stability. To ensure capital flows and exchange rate stabilities, the Bank of Thailand uses a managed float on exchange rates. The policy allows the Thai Baht to adjust via market mechanism, helping to stabilize against volatile capital flows. It also allows flexibility for the Bank of Thailand to influence the exchange rate in extreme events in order to avoid excessive volatility. All the mentioned policies have helped to keep the current economy in good balance. Today, capital flows, private sector balance sheets, as well as real estate values remain healthy, which should allow private spending to return with confidence and enable fast recovery. However, there are risks we must closely monitor over next year. As the U.S. economy continues to recover strongly, earlier timing of the U.S. interest rate normalization is anticipated, which could result in capital flow volatility. At the same time, household debt, at 83% of income, is also a factor to be monitored with caution. We have now covered growth, price, and financial stability. The Central Bank aims to maintain all three facets of stability for continuity in order to support growth potential.

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.