prasarn trairatvorakul : bank of thailand ’ s policy direction in 2012 speech by dr prasarn trairatvorakul, governor of the bank of thailand, at the bank of thailand, bangkok, 27 january 2012. * * * good afternoon, honorable guests and members of the press, 2012 is a special year because it is the bank of thailand ’ s ( bot ) 70th anniversary, a mark of extensive experience for an institution. faced with numerous challenges to monetary policy and financial institutions policy implementation, the bot has through the past 70 years upheld the institutional value that our policies must be based on sound principles, yet embracing enough flexibility to accommodate the changing environment. our ultimate goal is to promote thailand ’ s long - term economic and financial stability. our policy direction in 2012 will continue to reaffirm our long - held determination to strengthen the country ’ s economic resiliency and the well - being of the thai people. notwithstanding short - term economic obstacles that have weighed on current sentiments, the thai economy ’ s main challenge has remained the same since my address last year. this major challenge is how we all can become more proactive since idleness during a time of rising competition could easily cause us to fall behind. as such, all parties should always be ready to improve oneself and to prepare for uncertainties that may occur in the future. in this same spirit, the bot has modified our strategy to fit the changing environment and is willing to work with all parties to ensure that the thai economy can continually expand in line with its potential. policy implementation in 2011 looking back at 2011, the bot implemented our monetary policy to ensure stability against the backdrop of robust economic expansion in the first three quarters of the year. thus, we continued to normalize the policy rate, as i had stated in last year ’ s policy statement. after the economy was hit hard by the flood crisis amid the stagnating global economy in the final quarter, the bot policy was adapted to the changing circumstances, evidenced by the monetary policy committee ’ s ( mpc ) decision to lower the policy rate in the last meeting of the year. throughout last year, the bot also paid particular attention to policies that facilitate businesses in normal times and in crisis times. these included policies that ensure the exchange rate movements consistent with the underlying economic fundamentals and that its volatility remained manageable by thai businesses. moreover, our policy on financial sector regulation and supervision has ensured that thai financial institutions maintain

their status as a credible and efficient financial intermediary and able to meet private sector demands. these efforts included encouraging financial institutions to rationalize their transaction fees structure, introducing digital cheque - imaging system, and relaxing certain measures related to financial institutions to alleviate financial burdens of flood - affected victims. economic conditions and challenges for 2012 the path towards the future is not a smooth one. ongoing challenges from the past and new challenges will increase obstacles for the thai economy. domestic issues still remain an important hurdle while emerging external issues have created new challenges. these challenges are inherent parts of the mega trends, which include the crisis facing western economies and advancing regional economic integration. currently, thailand appears to be at a transitional gateway of these mega - trends, where the future looks blurry. the persistent economic slowdown plaguing the advanced economies of bis central bankers ’ speeches united states and europe leading up to sovereign debt crisis and continued financial system stresses do not yet have a clear resolution in place. many observers, however, view that after this transitional gateway, asia will be under the spotlight with china as the new leader, leading the economic expansion for other countries in the region. despite this optimism, countries in asia cannot afford to relax, sit back, and enjoy the ride, as economic volatility could arise intermittently via trade and financial channels from western economies. the degree of such impact depends on how well each economy is prepared for the potential disruption. another aspect of the transitional gateway is the asean economic community ( aec ) in 2015. this regional integration will bring not only changes in the regional investment and trade landscape, but also changes in people ’ s attitude as an asean citizen where travel and contact will become more frequent. nonetheless, we should not view aec as the final destination, but rather a stepping stone towards enhancing economic resiliency in the region by creating a single asean market and production base. this would help foster value - added characteristics of the thai economy and increase opportunities for our people, businesses, and everything else that will bring about a better standard of living for all. the two mega - trends i have outlined, when combined with the flood crisis at the end of last year, mean that thailand needs to quickly upgrade infrastructure to improve competitiveness. in particular, public investment in effective natural resources management system and improved governance of public administration will serve as an important driving force for sustainable economic growth. evolution of economic activities in line with the changing environment while the immediate obstacles may have changed, the