while they are no longer warranted by the economic situation may lead to moral hazard behavior, which will result in the build - up of inefficiencies and distortions in the financial system. we need to make sure that inflation does not derail growth and the financial system remains healthy and acts as a lubricant to keep the economy taking off smoothly. part 2 : how do we get there? guidelines for our policy normalization • a holistic and integrated approach towards both monetary and financial policy normalization. just as we required concerted effort of all policies and financial measures to get us through this crisis, the unwinding and recalibrating of both monetary policy and financial measures must be done in unison. with economic recovery gaining traction and inflation pressure increasing, policy normalization • must begin. rate hikes will help contain inflationary pressures and ensure price stability that is required for a sustained growth path. a gradual removal of financial support measures is in line with income recovery while encouraging banks to continue the normal functioning on their own with proper risk management. pursue a gradual and measured normalization regarding the pace and sequencing of policy withdrawal a. [ financial front ] moving from broad “ blanket - type ” to targeted measures. a gradual and measured approach allows flexibility to withdraw financial measures with limited impact. broad - based measures will be normalized first in line with the overall macroeconomic strength. targeted measures need to stay in place to help support those that still lag behind as the recovery is uneven. • targeted financial measures that will still be in place : 1 ) long - term debt restructuring until “ at least ” end of 2023 to be in line with the recovery path of the economy / income of retail borrowers 2 ) asset warehousing program until “ at least ” april 23 by which the tourism sector is expected to recover, and 3 ) special loan scheme until “ at least ” april 23 to encourage businesses to adapt to new trends of the post - pandemic world ( digital, technology, green ). the clause “ at least ” means we will be flexible, pragmatic and only remove them once deemed appropriate. b. [ monetary policy front ] • gradual : we do not see the need to undertake aggressive heroically large rate hikes. aggressive hike is not warranted as the thai economy is still in the early phase of recovery, while it could risk derailing the recovery. a gradual approach is needed to strike a balance between facilitating a smooth take -

off of the recovery and minimizing the impact from potential bumps. • measured : policy decision will be calibrated taking into account economic conditions and circumstances prevailing at the time. if a pause is required, we will pause. if 50 bps is necessary to meet our policy objective, we will raise 50 bps. but with the current circumstances, aggressive rate hikes or too early withdrawal of financial measures can jeopardize the economic recovery given pockets of vulnerabilities and the uneven impacts on different groups. c. we have taken first steps towards this at the financial institutions policy committee ( fipc ) meeting on june 30th and the monetary policy committee ( mpc ) meeting on august 10th. • the fipc decided to withdraw some of the blanket - type measures including fidf fee cut and bank dividend payment restrictions. • the mpc voted 6 to 1 to raise the policy rate by 25 bps. part 3 : what is our rationale for monetary policy normalization? [ 3. 1 mpc decision : 10 august ] two weeks ago, the mpc has delivered the first policy rate hike after having held the policy rate at its historically low level for more than two years. after a thorough assessment of all the trade - offs, the mpc judged that policy normalization was warranted as the balance of risk has changed : the recovery is intact and resilient, financial stability remains sound overall, but inflation risk has increased. 1. the recovery is intact and resilient a. economic recovery gaining traction supported by a strong recovery of tourism and domestic demand given improved labor market, household income and economic activities. although q2 gdp headline is lower than expected, we reaffirm the growth trajectory and economic recovery underpinned by strong domestic demand growth. consumption has recovered well with not just pent - up demand but supported by real improvements in income. recovery of the tourism sector is key to ensuring a smooth and sustained income recovery as the sector accounts for 12 % of gdp and employs over 20 % of total employment. • gdp growth = 1. 5 % in 21, ~ 3 % in 22, ~ 4 % in 23 ; 2. 3 % / 2. 5 % for q1 / q2 this year • consumption growth = 3. 5 % / 6. 9 % for q1 / q2 this year vs. 3. 3 % pre - covid • non - farm income grew 10. 4 % / 13. 5 % in q