M R Chatu Mongol Sonakul: Bank of Thailand’s review of major economic events in Thailand during the past year A Statement by M R Chatu Mongol Sonakul, Governor of the Bank of Thailand, on Thailand’s 1 Economic and Monetary Conditions: Bank of Thailand’s Public Report, 27 December 2000. *  *  *  Ladies and gentlemen, On the occasion of the New Year, the Bank of Thailand as one of the main national institutions would like to take this opportunity to review some of the major economic events during the year. We would also like to review the work that the Bank of Thailand has carried out in terms of economic policies and internal restructuring. This would also be a good opportunity to raise a number of issues, which the private sector may find important for consideration in the next year. In the past year, the Thai economy has continued to expand. However, the growth rate was more moderate than anticipated. Economic recovery was not broad-based, and there remain pockets of fragility. In the second half of the year, with the adverse effect of increased oil prices, consumer and investor sentiment deteriorated, leading to deceleration in domestic spending. As a result, inventories of finished products rose by 22 % from the same period of last year. At the same time stocks of finished products, which averaged around 15 days of sales last year, rose to 17 days of sales this year. Sectors that saw large increases in stocks were canned seafood, beverages, and automobiles.
However, at present, private sector spending has been affected by the decline of consumer and investor confidence, leading to a situation where those with purchasing power are cautious in their spending. This confidence has to be restored. Those who are able to invest have to begin investing. But a good starting point to restore confidence is to have a clear economic policy framework which can be realised only by having people electing good citizens to run the government. If the people are confident in their government and in the policies of that government, then confidence in the economy will be restored speedily. The third issue: Fiscal policies for economic growth Fiscal policies will play an important role in the process of economic recovery next year. At present, government spending amounts to a fifth of GDP, which is not considered as a high level. But for other countries, people are used to the system which the government plays a major role. Government deficit at a level which is conducive to economic recovery should therefore be readily understood and accepted. 6  BIS Review 6/2001  Therefore, fiscal policies must play a more important role in stimulating the economy, but should maintain a balance between economic stimulation and long-term fiscal discipline. The fourth issue: Monetary policy On monetary policy implementation, the Bank of Thailand’s view is that the Thai economy at present and in the near future continues to need low level of interest rate rather than a high level.