the thai economy : the current state and the way forward speech by dr. veerathai santiprabhob governor of the bank of thailand japanese chamber of commerce ( jcc ) thailand dinner talk 27 march 2019 jcc board of directors, jcc members, distinguished guests, ladies and gentlemen, good evening to you all, thank you very much for inviting me once again to give a talk at the japanese chamber of commerce thailand. this event is a great opportunity for us all to exchange our views and ideas on the thai economy and its prospects as we move forward into the year 2019. your opinions and feedback are undoubtedly valuable to policymakers, like myself, and i look forward to a very engaging session tonight. japan and thailand have been in long - standing diplomatic relations for more than 132 years — and even much longer from a trade perspective, dating back to as early as 1600s. time has shown that while the thai economy has encountered many challenging transitions, business partnerships between japan and thailand have continued to remain strong, fostering economic opportunities for both our nations throughout the present day. as you all know, this year is a very special one to all of the thai people as well as the japanese people as both our countries will hold national celebrations for our respective head of state in early may — to celebrate and honor the coronation of his majesty the king maha vajiralongkorn and the ascension of crown prince naruhito to the imperial throne. this year also marks a significant transition for thailand to return to democracy as the general election was just held over the weekend. ladies and gentlemen, undoubtedly, one of the most pressing questions many audiences here today are wondering will certainly be on the implications of the outcome of the election and how that will impact the thai economy. unfortunately, it is too early for us to make a call as we still await 1 / 9 ratification of the election result, formation of the new government, appointments of key members of the cabinet, and announcement of the economic policy. so instead, today i want to focus my talk on long - term perspective of the thai economy and highlight key qualities of our economic resilience that have allowed the thai economy to endure a number of domestic and external shocks — many of which in the past, i believe, were much more challenging compared to the impending political change post - election. but before speaking about long - term perspective, allow me to talk briefly on our short - term outlook as our monetary policy committee has just recently revised

economy. the direct effect of us safeguard measures on certain products led to slowdown in exports of solar cells and washing machines, though they have had small impact on our overall exports 1. meanwhile, us trade measures against china could have indirect impact on thai exports as a number of thai firms are part of chinese production and supply chain networks ; potential reduction in chinese exports has reduced the demand for thai supply. furthermore, the measures can lead to trade diversion, the consequence of which remains to be determined. on one hand, the thai economy may benefit from new investments from relocation of chinese factories. thai firms may be able to supplant chinese competitors in exporting to the us. on the other hand, trade diversion can lead to increased competition within thailand as excess supplies of goods from china are diverted to the thai market and priced at discount to compete with local products. besides, prolonged uncertainties surrounding trade measures had led to unusual front - loading of exports in 2018 and will weigh on export growth in 2019 — just when the global demand has begun to moderate. it can also impair business sentiments, preventing firms from taking on new investment projects. ultimately, as the us - china trade disputes remain unresolved and the us ’ s inclination for further trade 1 both products make up less than 1 percent of thailand ’ s total exports 3 / 9 protectionism remains, such as potential us auto tariff measure, trade disputes will certainly be the key concern for all authorities. ( 2 ) slowdown in the chinese economy is another concern. while the slowdown may be in line with the chinese authorities ’ goal of restructuring the economy towards a long - run sustained growth model, in the short - term it can have significant impact on the thai economy. this is because of high degree of linkages in terms of supply chain and production networks, tourism, and property investment. for instance, china is thailand ’ s second largest export partner following the asean region, making up about 12 percent of our exports in term of value while the chinese tourists represent nearly 30 percent of total foreign tourists. besides, slowdown in the chinese economy may contribute to higher volatility of the chinese yuan ; the movements of which can influence movements of the baht and other currencies in the region. against this backdrop, short - term slowdown in the chinese economy needs to be closely monitored. ( 3 ) geopolitical risks in many parts of the world remain elevated. these include long - standing issues such as the us - north