Prasarn urges long-term view

“For this, long-term coherent vision and concerted efforts among all stakeholders, both public and private, are needed,” he said.

Given the country’s structural shortcomings, there is a need to improve infrastructure and productivity by developing technology and innovating, he said in his address on “Navigating through Volatility with Long-term Focus” delivered at the Association of International Banks Dinner Speaker Series on Monday. 

The well-being of the workforce and the quality of education and training are also crucial to increasing competitiveness, he said.

At The Nation International Conference this month, he also told Asian business leaders that Thailand had to remove structural bottlenecks, chiefly in the labour market and in productivity enhancement.

In the latest speech, Prasarn noted that Thailand was now challenged by both external and internal risks, but these could come with opportunities if Thailand is prepared to deal with uncertainty in the global economy. 

“In an increasingly volatile world, we must do more. Our efforts should not be just about coping with short-term fluctuations, but also about laying a long-term foundation for Thailand’s future. That requires a forward-looking plan of action by all stakeholders. 

“The Bank of Thailand, for our part, will continue to ensure a stable financial and economic environment so that businesses can continue to thrive and individuals can enjoy better standards of living on a sustainable basis,” he said.

The developments in the United States, Japan and China are the three major factors influencing the global economy.

The central bank tries to strike a balance between economic growth and macroeconomic stability, Prasarn said. Decision-making on monetary policy via the setting of interest rates has always taken into consideration the growth, inflation and financial-stability dimensions. 

“However, there are limitations to what monetary policy can achieve. A single instrument, namely the policy interest rate, cannot target multiple objectives such as price stability, financial imbalances, the exchange rate and capital flow simultaneously. The policy choices inevitably involve trade-offs between different objectives. Policy-makers will have to weigh carefully the costs and benefits of a policy decision.” 

To tame exchange-rate volatility, the central bank is ready to use policy instruments for the prevention and management of dysfunctional market conditions and excessive speculation. However, in the long run, exchange rates should be governed by the market mechanism so that they can serve as an important price signal and catalyst for structural change.