pongpen ruengvirayudh : thailand in 2014 – recent developments and challenges ahead keynote address by ms pongpen ruengvirayudh, deputy governor for monetary stability of the bank of thailand, at the thomson reuters fx community forum 2014, bangkok, 18 february 2014. * * * distinguished guests, ladies and gentlemen, 1. it is a distinct pleasure to be back here again and i would like to thank thomson reuters for the invitation. to the winners of this year ’ s fx awards, i would like to congratulate you on your notable achievements. and to the rest of the market participants, i would like to express my thanks for your continuing contribution to the development of the thai foreign exchange market. 2. much has changed both at home and aboard since i gave an opening address at this event last year. on the external front, the us federal reserve ’ s planned scaling - down of its qe program has sparked turbulence in the emerging markets as investors continue to speculate on the fed ’ s exact tapering timeline. on the domestic front, the absence of political solutions continues to subdue public and private spending, with unavoidable repercussions on overall growth outlook. certainly, the interplay between these recent developments will have profound implications for the thai economy to some extent going forward. for this reason, i would like to take this opportunity to share with you my views on these important developments and the potential challenges they pose to the thai economy. 3. let me start with the developments on the external front. as you remember, around this period of last year, one of the issues that had attracted a lot of public attention was the continued influx of fund flows into the emerging markets including thailand. but this theme has suddenly changed when the us federal reserve signaled in may its intention to scale down, and eventually terminate, its asset purchasing program. the signaling immediately sparked turbulence in capital and currency markets in emerging economies and certainly serves as a recurring reminder that the linkages in the international economy are as psychological as they are mechanical. from june to august, thailand, like other economies in the region, continued to witness further episodes of outflows as investors continued to reform their expectations towards the exact tapering timeline. 4. in the recent months, turbulence in the markets seems to have somewhat been moderated. this possibly reflects the fact that much has been priced in during the earlier outflow episodes, as well as the fact that it has been clearer to the markets

staff macroeconomic projections indicate continued progress in reducing fiscal imbalances in the euro area. the aggregate euro area general government deficit is expected to have declined to 3. 2 % of gdp in 2013 and is projected to bis central bankers ’ speeches be reduced further to 2. 7 % of gdp this year. general government debt is projected to peak at 93. 5 % of gdp in 2014, before declining slightly in 2015. looking ahead, euro area countries should not unravel past consolidation efforts and should put high government debt ratios on a downward trajectory over the medium term. fiscal strategies should be in line with the stability and growth pact and should ensure a growth - friendly composition of consolidation which combines improving the quality and efficiency of public services with minimising distortionary effects of taxation. national authorities should also continue with the decisive implementation of structural reforms in all euro area countries. these reforms should aim, in particular, to make it easier to do business and to boost employment, thus enhancing the euro area ’ s growth potential and reducing unemployment in the euro area countries. to this end, the governing council welcomes the european commission ’ s communication of yesterday on the prevention and correction of macroeconomic imbalances and on the excessive deficit procedure. looking ahead, it is key that the macroeconomic surveillance framework in the euro area, which was significantly strengthened in the wake of the sovereign debt crisis, is implemented fully and in a consistent manner. we are now at your disposal for questions. bis central bankers ’ speeches