With a promising recovery prospect, minding the future risks to financial stability and being equipped with stability tools tested and refined over time, the monetary policy committee will carefully weigh the tradeoff between short-term gains and longer-term risks and ensure that the economy will be provided with enough financial ease to recover sustainably to its potential. Ladies and Gentlemen, Apart from the deviation from potential I mentioned earlier, the current economy shows symptoms that potential growth, which depends on labor, productivity and infrastructure development, may have reached its limit. At this stage of our discussion, let me refer to some prominent symptoms. Thai labor supply has started to gradually decrease due to the trend of aging society. Research has shown that increasing labor supply by increasing retirement age and reliance on foreign labor will not be sufficient. Since we must accept the aging workforce trend, we must rely on increasing productivity and efficiency through structural changes to lift growth potential, a task which requires supply-side policies. Thailand’s productivity growth has declined since the Asian Financial Crisis due to the misallocation of labor, government policy, and low capital investment, leading to supply constraints. Productivity can be increased by matching labor to valuable production. Labor in Thailand still has potential to move from the current concentration in agriculture, which was distorted by government policy, to more productive sectors like electrical appliance and capital machinery.
The Bank also has a role in developing the financial system to promote growth. I would like you to follow me now through the details of our role on growth and hope to leave you with more confidence that Thailand is in good policy-makers’ hands. My talk today will cover three areas. Firstly, I would like to share Bank of Thailand’s views on Thailand’s current growth potential. Secondly, I would like to walk you through the current economic conditions and illuminate the role of central bank in returning balance in these situations. And thirdly, I will address the classical yet very current challenge of lifting growth through boosting productivity. I will share with you the opportunities we see for Thailand, involving the structural changes that are now underway, and the cooperation by the central bank, public and private sectors that will transform these opportunities into sustainable long-term growth. Ladies and Gentlemen, Having outlined our plan for today, I would like to begin with the concept of growth potential and its application to the state of Thailand’s economy. What do we expect to see from a Thai economy achieving true growth potential? Two components. First is growth at full sustainable capacity. We would expect to see factories producing their optimum output while hotels have the maximum number of guests that can be served comfortably, and infrastructure from roads to banking system able to lend full support. Second is lifting the long-run growth trend.