economic data for march suggests growth may have reached the lowest point. furthermore the socalled “ technical recession ” would occur once economic fundamentals have simultaneously deteriorated, which is a lengthy process. to date, this situation does not apply to thailand. looking ahead ladies and gentlemen, despite the heavy costs of political uncertainty, thailand ’ s underlying fundamentals remain supportive. looking at variables whose imbalances tended to be associated with crises in the past, we do not see these variables approaching crisis levels but rather staying at low risk levels. what we are observing is a mainly sentiment - led slump in demand and bis central bankers ’ speeches subsequently an opportunity for strong domestic rebound when sentiment improves. i would like to explore some key variables in more detail. financial volatility is well contained amidst economic slowdown. exchange rate has been relatively stable and international reserves have remained high, reflecting some degree of confidence among foreign investors and appropriate exchange rate management. inflation expectations are firmly anchored, allowing monetary policy some room to address the downside. we benefit from this stability because consistent macroeconomic policy commands credibility from the public. it is worth mentioning a risk when it comes to volatility : that even with the fed ’ s qe tapering already factored into the markets, the monetary policies of advanced economies continue to exhibit likelihood of change. these policy changes could cause thailand to experience capital outflows or a volatile exchange rate. the bank of thailand closely monitors these risks and currently assesses them to be manageable given thailand ’ s financial structure. credit risk is also moderated by the wisdom of the private sector. private companies have recently kept leverage in check at a cautionary debt - earnings ratio. financial institutions are carefully managing loan quality, as household debt levels that have been decelerating since last year indicate. moderate leveraging of firms and households together with strong balance sheets of banks allow private sector to withstand economic shocks. unemployment rate is low and stable, leaving households with enough purchasing power to start spending again when the economy rebounds. greatly adding to the strength of domestic purchasing power is the export sector. global recovery has become firmer as recent economic indicators such as global purchasing managers ’ index, or pmi, reflect the more resilient recovery in advanced economies. nearer to this region, the decelerating chinese economy is not a major cause for concern since it is more about economic restructuring than unexpected slump in domestic demand. the overall impact for thailand is that exports are still expected to be our main engine

prasarn trairatvorakul : managing thailand ’ s turnaround speech by dr prasarn trairatvorakul, governor of the bank of thailand, at the association of international banks ( aib ) dinner speaker series, bangkok, 15 may 2014. * * * introduction it is my great honor and pleasure to be back here in this auspicious occasion, and, first of all i would like to thank the association of international banks for inviting me to give a talk this evening. much has changed, since i gave an address at this event last year. though it is still warm and sunny in thailand, the economic condition is not quite the same. the economy continues to slow down after accelerated domestic spending in the past few years, worsened by political uncertainty that continues to this day. on the external front, the recent global economic recovery and monetary policy abroad has evolved with less uncertainty than before. for this exclusive evening, it is timely for me to share with you the recent economic developments and outlook of the thai economy as well as our roles to support sustainable growth of the thai economy and safeguard financial stability amid prolonged political uncertainty. recent and current economic situations let me first start by describing the economic developments. thailand ’ s recent economic circumstances have been unfavorable, but may have reached the trough. internally, growth has decelerated since the second half last year, owing mainly to diminishing domestic spending. the champagne party, fueled by the first - car tax rebate and rice pledging schemes, has ended, and we wake up with a hangover : worsened traffic jams, an overflow of durable goods and high household debt. adding to this backdrop, political tension rose and parliament dissolved late last year. this has dented private confidence and government spending, and puts further pressure on already - weak domestic demand. loss of confidence means postponed public and private investment as stakeholders tend to wait for more stable economic environment before taking the next steps. last year, thailand has not benefited from exports as we expected, due to weak global economic recovery and domestic supply constraints. furthermore, tourism was negatively affected by the political situation. with respect to the first quarter of this year, economic performance has been unsatisfactory so far and negative growth is predicted. naturally, negative growth numbers may have raised concern regarding a recession. however, i would like to offer a ray of hope by pointing out that the second quarter of negative growth is unlikely to occur, as the latest