The economy is expected to gather momentum and return to its potential from the second half of this year onwards. This positive outlook is attributable to a number of key fundamental strengths in the Thai economy. First, corporate sector balance sheets remain healthy, thanks to robust savings and profitability. Net profit of Thai listed firms in 2011 was forecasted to continue rising strongly despite damages inflicted by the floods. This will enable firms to rebuild and invest. Second, our banking sector is sound with a strong capital base. This reflects sustained profitability, good risk management and rigorous supervision. Latest information from our loan officer survey indicates banks’ continued willingness to lend. This will greatly facilitate a quick recovery in economic activity. Third, Thailand’s human resources and know-how provides a solid foundation for businesses to flourish and expand. A strong human capital base constitutes one of Thailand’s main comparative advantages. And this remains fully intact. Finally, a key element of the nation’s fundamental strengths that I would like to underscore is Thailand’s geographic advantage to benefit from the promising growth in Asia. The rise of China and the ASEAN Economic Community or AEC provide enormous opportunities for businesses operating in Thailand to expand and prosper as the regional markets and productions become more integrated. The complex supply network and infrastructure that have long been established in Thailand, especially in the automotive and electronics industries, serves as a unique platform for international investors to obtain a critical foothold in the region.

Without bold actions, economic as well as political ones, the potential for Europe to be swept into a downward spiral of collapsing confidence and stagnant growth looms large. This grim possibility will remain a drag on the global economic backdrop and hence a key risk factor for the Thai economy in the foreseeable future. BIS central bankers’ speeches  1  While the potential impact on Thailand through financial channel appears limited due to low direct exposure of the Thai financial institutions to the European financial system, the impact through trade could be significant. This reflects Thailand’s strong trade tie with Europe, which accounts for around 10 percent of our total exports. Fortunately, any such slowdown in Thai exports can be cushioned to some degree. A key reason is Thailand’s shift towards more intra-regional trade within Asia, as well as our success in diversifying into alternative export markets more generally. Against this backdrop of continuing headwinds from abroad, I believe that Thailand is poised for a sustained upward growth trend. Despite the floods, our long-term growth trajectory remains intact. We project that economic growth will rebound to 5.7 percent in 2012 driven mainly by strong domestic demand. Fiscal spending through flood-relief and stimulus measures will play a supportive role. The latest economic data show private consumption already recovering swiftly. Business confidence has also rebounded strongly and investment is projected to regain a firm footing by the third quarter of this year.