sethaput suthiwartnarueput : thailand - a resilient future speech by dr sethaput suthiwartnarueput, governor of the bank of thailand, at the association of international banks ( aib ) dinner talk, bangkok, 24 july 2024. * * * mr. giorgio gamba, chairman of the aib distinguished guests, it is a great pleasure to be here again. before getting to the topic'thailand – a resilient future ', we have a somewhat challenging present that we need to get through. i would like to share with you about the challenges that we are facing now and likely to face going forward and clarify some misconceptions about what is going on. part 1 : if the economy is recovering, why does not it feel like it is? let me start with the bank of thailand ( bot )'s economic outlook. we have been saying in our monetary policy committee statements that the economy is gradually recovering. recovery is there, but it is slow and very uneven. we expect the gdp growth this year of 2. 6 %, but a lot of people probably say they do not see nor feel it. why is that? i think there are a couple of reasons. first, domestic demand or consumption has been recovering quite well, but manufacturing production has seen much less recovery and remains below pre - covid level. last year, consumption grew at 7. 1 %, which is as high as we have ever seen, and is still going strong in first quarter of this year. however, most of the consumption growth is heavily concentrated in services ( about 80 % ). we also see increased competition from imports, especially from china as reflected in the increasing share of imports from china in the consumption basket. so, the increase in consumption has not necessarily translated into increases in domestic manufacturing activities. in addition, manufacturing production is facing structural headwinds – key exports drivers like petrochemicals saw exports to china drop by 30 % in the last three years due to china's greater self - reliance policy. second, while the incomes of both non - agricultural employees and self - employed workers have recovered back to pre - covid level, their recovery paths are very different. self - employed workers like merchants, taxi drivers and people working in service sectors, had a huge dip in earnings during covid, which suggested large wealth foregone. so, if you ask people whether they feel like things have recovered or things are

i gave in april. they indicate that the economic recovery in the euro area has maintained its momentum. in the second quarter of 2004, real gdp grew at a rate of 0. 5 % relative to the previous quarter, after 0. 6 % in the first quarter. the conditions for a continuation of the economic recovery remain in place. on the external side, global demand remains robust, notwithstanding temporary fluctuations, contributing to euro area export growth. on the domestic side, higher corporate profitability and favourable financing conditions should support business investment. in particular, the level of interest rates is very low by historical standards, in both nominal and real terms. private consumption should also be sustained by growth in real disposable income and, with some time lag, by an improvement in the labour market. against this background, we expect the present gradual recovery to continue in the coming quarters and to become more broadly based, leading to a somewhat stronger upswing in the course of 2005. this picture is consistent with the most recent ecb / eurosystem staff economic projections which, as you may be aware, are now published on a quarterly basis. the last projections, published on 2 september, envisage that euro area real gdp growth will recover from 0. 5 % in 2003 to between 1. 6 % and 2. 2 % on average in 2004, and will be slightly higher, between 1. 8 % and 2. 8 %, in 2005. i should add that forecasts from international organisations and other sources convey a broadly similar picture. while this outlook for economic activity is surrounded by some uncertainty, overall the risks appear to be broadly balanced. on the upside, the momentum of the recovery, which was stronger in the first half of 2004 than was anticipated earlier in the year, may imply a positive stimulus in the coming quarters. on the downside, there are still concerns about continuing economic imbalances in other parts of the world which could affect the sustainability of the economic recovery, at both the global and euro area levels. in addition, if oil prices were to reach higher levels than currently expected by markets, this could dampen somewhat both foreign and domestic demand, even if the recent rise in oil prices cannot, by any mean, be compared with the historical first and second oil shocks of the 70s and the beginning of the 80s. regarding the outlook for inflation, recent oil price developments, together with increases in indirect taxes, have pushed inflation rates in the euro area to levels somewhat higher than