prasarn trairatvorakul : global risks and the outlook for thailand address by dr prasarn trairatvorakul, governor of the bank of thailand, at the fitch ratings 100th anniversary conference, bangkok, 27 september 2013. * * * distinguished speakers and panelists, ladies and gentlemen, i would like to thank fitch ratings ( thailand ) for inviting me to give an opening address at this year ’ s annual conference. much has changed both at home and abroad since i gave an opening address at this event two years ago. in retrospect, however, it is interesting to look back over the past two years and notice how most global risks we talked about – for instance, fiscal drag and political gridlock in the u. s., sovereign debt crisis in the eurozone, among others – are still with us today. most of the risks have reduced in terms of magnitude and urgency, but they certainly have not disappeared. in fact, each of them took turn to appear in the media spotlight and became an object of market ’ s obsession. victor hugo once said, “ no army can withstand the strength of an idea whose time has come. ” and that sounds fitting for today ’ s financial market, where obsession with one idea could have a far - reaching implication for so many countries, at once, in an invasive way that is hard to shield against. a. the state of indecisiveness that we live in it has been almost six years since the beginning of the global financial crisis. but despite the extraordinary policies in major economies, despite reassuring words of global authorities, despite considerable reform efforts, the healthy state of full recovery seems to be constantly pushed away from us. at this point in time, the world is still struggling in what i would like to describe as the state of “ indecisiveness ”. first is the indecisiveness that we have about growth prospects. mixed signals and counteracting forces abound, and it has become less obvious how global economic forces will - equilibrate. the talk of the two - speed or three - speed world, which was heard frequently earlier this year, proves to be an oversimplication of a much more complicated reality. among advanced economies, the u. s. and japan seem to have gathered some tangible traction as of late. but one should be reminded that the impact of sequestration in the u. s. is still yet to be felt fully. and

strong growth last year. more specifically, the boost from the first - car scheme dissipated sooner than expected. household debt, which has risen fast and is now in the ballpark of 80 percent of gdp, starts to weigh on durable and semi - durable purchases visibly. and businesses also seem to postpone investment awaiting better economic conditions at home and abroad. in light of these factors, the bank of thailand projected gdp growth to be around 4 percent this year, a downward revision from a more bullish view we had earlier. but i would like to note that this is still a reasonable growth amid weak external environments, coupled with the fact that consumption has become somewhat overstimulated already. looking ahead, fundamentals of the economy remain sound overall. monetary and fiscal conditions will continue to be supportive. and despite some delay, contribution from exports is also bound to improve as the global economy gains a firmer footing. some concerns that i have about the outlook, however, are the possibility of continued sluggishness in private demand, and the possibility that supply - side constraints – both in the labor market and the production sector – could hold back the future potential of investment and exports. through this turbulent time, the bank of thailand has been steering its monetary and financial policies with prudence. the flexible inflation - targeting framework succeeds in anchoring inflation expectation, thus fostering continued growth and stability. the managedfloat regime accommodates baht movements that are in alignment with fundamentals, with policy instruments ready to curb excessive speculation and overshooting if needed. the strong international reserves position, at the same time, helps cushion against sharp flow reversals. efforts have also been expended on financial liberalization and regulatory reforms under the financial sector master plan. and for the banking sector, banks ’ capital bases have been strengthened well above international standard, while granting new subsidiary licenses for foreign banks will ensure that the future banking system stays competitive and vibrant. c. lifting barriers to sustainable growth distinguished audience, sound macroeconomic and financial practices have been instrumental in safeguarding economic stability and helping the country weather through numerous shocks that have come its way. sufficient policy spaces in monetary and fiscal policies provided buffers amid intense headwinds and supports in the times of need – notably in the aftermath of the global financial crisis and the flood devastation in late 2011. but now that the height of the global crisis is behind us, and the need for short - term macroeconomic management less pressing, a serious attention should also be