Economic resilience priority for 2012
The Bank of Thailand yesterday said its policy direction this year would focus on making the economy more resilient and improve the people's standard of living, while hinting that monetary policy could be eased amid moderate inflationary pressure.
"All parties should adjust themselves to move forward in response to volatility, which will occur in the future," BOT Governor Dr Prasarn Trairatvorakul said at a news conference.
He said the central bank would continue to safeguard economic stability mindful of the trade cycle, especially the risks arising from the global situation. Monetary policy could shift its focus to the promotion of the private sector’s growth thanks to the possibility of moderate inflation risks.
At the same time, he said, exchange-rate management would adhere to the principle of flexible movement in line with economic fundamentals. The BOT would continue to push forward the Capital Account Liberalisation Master Plan to allow Thai entrepreneurs and retail investors more flexibility to manage overseas investment. In this regard, a public hearing is expected to be held about the master plan.
The central bank also aims to increase the competitiveness of financial institutions as it seeks to improve the financial-system infrastructure, such as developing payment systems to prepare for cross-border transactions involving regional currencies.
"We will also work towards raising the standard of Thai financial institutions to become Qualified Asean Banks," Prasarn said.
QAB is a standard used within Asean to allow qualified financial institutions to expand their businesses within the region.
He added that the central bank would also have to adjust itself. For this year, the Thai economy would face up to the ongoing challenges from the past and new challenges. Domestic issues remain an important hurdle while emerging external issues have created new challenges, being inherent parts of the mega-trends – the crisis of Western economies and the advancing regional economic integration.
Prasarn said regional integration would bring not only changes in the regional investment and trade landscape, but also changes in people’s attitude as an Asean citizen where travel and contact would become more frequent. The country should step towards enhancing economic resilience in the region by creating a single Asean market and production base. This would help foster value-added characteristics of the Thai economy and increase opportunities for the country’s businesses.
"The mega-trends I have outlined, when combined with the flood crisis at the end of last year, mean that Thailand needs to upgrade infrastructure quickly to improve competitiveness," said the central bank governor.
He said overall challenges that have remained require all parties to formulate a strategic framework and policy space to enable the Thai economy to stride past the transitional gateway smoothly. For the public sector, the policies that promote investments efficiently would be related to infrastructure, education, and governance such as reducing corruption and improving political resilience. Public investment attracts further investment from both private and foreign investors, the so-called crowding-in effect.
The BOT governor encouraged the private sector to learn more about the complexity and risks of various financial products to lower costs and increase competitiveness, obliging the financial sector to play a bigger supporting role for the real sector. In addition, strengthening the international organisation of the financial sector would be a key driver for more competitiveness.
