prasarn trairatvorakul : the outlook for thailand ’ s economy in the face of concerns about the slowing us recovery and europe ’ s debt crisis address by dr prasarn trairatvorakul, governor of the bank of thailand, at the foreign correspondents ’ club of thailand, bangkok, 3 november 2011. * * * distinguished fcct members and guests, ladies and gentlemen, first of all, i would like to thank the fcct board for inviting me to share my view on thailand ’ s economic outlook in the face of the u. s. economic slowdown and the eurozone ’ s sovereign debt crisis. actually, the organizer ’ s original intention reflects very well what was in the back of everyone ’ s mind over the past few months when we talked about key challenges to the thai economy. but as all of us here today might agree, things have changed so dramatically over the past month alone, with the country now being swept over by the flood. while our feet need to stand firm weathering through and recovering from the flood together as a nation, our eyes cannot lose focus on what happens in the u. s. and the eurozone. i think it is fair to say that what happens in the u. s. and the eurozone will likely reshape the global financial and economic landscape over the years to come. and for thailand, these factors and their implications on the global economy will also determine whether the recovery from the flood will be a rosy or a painful one. so, my talk today will be divided into two parts. first, i would like to touch briefly on the bank of thailand ’ s latest view on domestic growth in short and medium term. then i will delve more deeply into concerns in the u. s. and the eurozone, along with the likely implications on thailand ’ s recovery. ladies and gentlemen, i would like to first share with you the bank of thailand ’ s latest economic projection and our outlook for the thai economy. despite the fact that we have less than two months to go for 2011, the bank has just revised down its growth projection for the thai economy this year, from 4. 1 percent in july ’ s assessment to only 2. 6 percent in october ’ s. this significant downward revision reflects the severity and the broad - based impacts of the flood, which has brought about a halt in agricultural and manufacturing production in affected areas, and has also disrupted production chains in other areas as well

. while some of these factors have been with us for a number of years now, more recently, the downside risks facing the global economy have been compounded by the outcome of the british referendum vote, or brexit, as it is more commonly referred to. as a result of brexit, the global outlook for 2016 – 17 has worsened, as the vote added significant uncertainty to an already fragile global economic environment, and is likely to affect confidence and weigh negatively on consumption and investment. i should add that brexit has also highlighted the importance of inclusive growth, an issue which was highlighted in the latest g20 communique. bis central bankers ’ speeches the imf noted that prior to brexit, economic data and financial market developments pointed to an improvement in the outlook for a few large emerging markets and a modest upward revision to global growth for 2017 ( 0. 1 percentage point ). in the aftermath of brexit, however, the imf downgraded global growth projections by 0, 1 percentage points for both 2016 and 2017 to 3, 1 and 3, 4 per cent respectively. advanced economies were primarily responsible for the more pessimistic outlook, with the imf revising the united kingdom ’ s 2017 outlook downwards by almost a full percentage point, while the euro area ’ s outlook was downgraded by a lesser 0, 2 percentage points. with the exception of sub - saharan africa, where the imf downgraded its outlook by over 1 percentage point for 2016, mainly on account of adverse developments in nigeria and south africa ( the two largest economies ), the outlook for emerging markets has generally remained steady, with stronger than expected recoveries in russia and brazil in the forecasts. although the contribution of emerging markets to global growth has dwindled in recent years, they continue to account for around 58 per cent of global gross domestic product ( gdp ) and therefore remain significant. given that the brexit outcome was generally unanticipated, the outcome was initially followed by heightened financial market volatility and renewed risk aversion. emerging market economies were subjected to a strong negative impact from brexit, however, the emerging markets most strongly affected have been those that are highly dependent on the eu as an export market, like south africa. notwithstanding the short term financial market volatility, financial markets have since recovered and asset prices have rallied. this development was supported by a good level of preparedness by major central banks