Monetary policy must be conducted with caution as to not contribute to further build-up of financial vulnerabilities. Furthermore, amidst the prolonged period of low interest rate and the increasing search-for-yield behaviors, it is our view that supervisory coordination is increasingly imperative for effective risk monitoring to make sure that the regulations across different regulators are broadly aligned and that financial 4  activities cannot simply move from a regulated to an unregulated umbrella. This is reflected through our close collaborations with other regulatory bodies such as the Securities and Exchange Commission (SEC) and the Office of Insurance Commission (OIC). Ladies and gentlemen, While we have adequate external buffers to withstand short-term vulnerability in the global market, what would ensure the economy’s stability and resilience in the longer-run are productivity-enhancing infrastructures and ecosystem. This is crucial for the country’s competitiveness in the years to come. I am delighted to say that we are on the path of productivity improvement. With the limited time I have, it is difficult to do justice to all the projects that have been initiated. Some of the most notable examples are the Eastern Economic Corridor (EEC) and transportation and digital infrastructure projects that have been long-overdue. On our side, the Bank of Thailand is doing its part to develop infrastructure and ecosystem needed for the ongoing transition towards the digital economy. Under the e-Payment Masterplan, we, together with the Ministry of Finance and the Thai Bankers’ Association, launched PromptPay, which has allowed real-time fund transfers among individuals and businesses.

Today I would like to highlight four key risks that could create more turbulence in the short- to medium-run: the tightening global financial conditions, growing trade disputes, geopolitical risks, and domestic financial stability risks resulting from the prolonged period of very low interest rates. Soon after the Global Financial Crisis, Thailand’s economy—like that of other EMEs—felt the unintended consequences of advanced economies’ unconventional monetary policy stimulus. Large capital inflows in search for higher yields caused significant upward pressure in asset prices as well as on EMEs’ currencies and corporate debt. It is inevitable that the reversal of that extreme measures—i.e., monetary policy normalization—would have the same sizable effect on EMEs as well, and this constitutes our first source of risk. In addition to the Fed, more central banks are expected to normalize their monetary policies in the coming years. As excessive liquidity unwinds, higher yields will drive up costs of capital faced by firms and governments, while EMEs with vulnerable external conditions and weak currencies will also face with increased external debt liabilities measured in local 1  currencies. Moreover, according to the Institute of International Finance, approximately 2.7 trillion US dollars of EME bonds and syndicated loans are due by the end of 2019, with approximately a third of that amount denominated in foreign currencies. Weaker currencies and high correlation of EMEs’ long-term bond yield to the US Treasury yield could reduce the ability of EME firms to service debt and could undermine economic stability.