In terms of growth stability, we have been on the low end of the balance. We observe Thailand’s average growth to be near zero in the past three quarters, and currently we are still well below the long-term trend. The underperformance was contributed to by political uncertainty and drawdown from earlier accelerated spending encouraged by previous government policies. The long stretch of low growth calls for the central bank to step in with policy that shores up demand. The Bank of Thailand has implemented accommodative monetary policy since the beginning of the year, while price and financial stability were also carefully monitored to ensure they were not compromised. BIS central bankers’ speeches  1  The accommodative stance has shored up demand up until now, with businesses gradually upgrading and adding capacity during the downturn, and as we enter recovery, they have retained the ability to resume production at normal levels. Continuation of monetary policy accommodation will benefit further investment through the availability of funds, especially now that the recent political clarity helps restore confidence both domestically and internationally. Revival of confidence is vital to recovery and restoration of growth towards potential. Recent economic data is supportive, showing that consumption and tourism have started to pick up and stimulus measures from the government have risen. On the external front, the steady recovery of the world economy, especially the U.S, will bolster the export sector. All these positive prospects point to on-track economic recovery and movement towards fulfilling the growth stability objective.

For example, we monitor excessive credit card loans to sub-par debtors, excessive foreign exchange speculation, and formation of a real estate bubble. Apart from abovementioned policies, the managed float exchange rate regime helps maintain stability in capital flows. Under this regime, Thai Baht is allowed to move in line with the market forces but gives the central bank ability to influence the exchange rate in the time of 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 enable fast recovery. Although the economy is anticipated to recover after private confidence regains, some notable risks must be addressed and closely monitored over next year. One that is worth mentioning is the expected U.S. interest rate normalization after recovery of the U.S. economy, which could lead to capital flow volatility in Thailand. Even with headwind from the Fed’s action of hiking policy interest rate, we anticipate only limited impact on overall Thai economy as the market has already gradually priced in the Fed’s stance since last year. Additionally, our reserves remain high, allowing the economy to be cushioned from the possible outflows of capital. Moreover our managed float exchange rate regime automatically stabilizes against possible volatility. At the same time, household debt, currently at 83% of GDP, requires a long-term solution. While its effect so far remains contained, its risk cannot be ignored.