Prasarn Trairatvorakul: Achieving Thailand’s true growth potentials – the role of the central bank Speech by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the Thailand Focus 2014: Reforming for Sustainable, Bangkok, 27 August 2014. *  *  *  Ladies and gentlemen, I am very honored and pleased to be addressing you at Thailand Focus once again. I would like to thank the Stock Exchange of Thailand, Phatra Securities and Bank of America Merrill Lynch for arranging what has become the must-attend forum on investment, policies, and the Thai economy. This year’s topic, potential growth, has gained new dimensions on the world stage since the Global Financial Crisis. Through harsh experience, advanced economies have learned that their long-term growth potentials may have been diminished by a protracted period of sub-par short-term growth. This idea of “secular stagnation” which went back to Alvin Hansen during the Great Depression and brought back to the spotlight last year by Larry Summers has now been widely discussed in the media as well as policy circles. While our situation is different from the West, Thailand has also been experiencing sub-par growth during most of the past seven years. As the economy now wakes up from the third contraction since 2008, it is natural to ponder about the economy’s growth going forward. Ladies and gentlemen, I am most pleased to have this talk with you today because the Bank of Thailand stands between short-term hiccups and Thailand’s long-term growth, bringing decades of experience in economic stabilization.
While the leu was strengthening, up until the summer of 2007, the issue of adopting the euro was not on the agenda of economic agents. The crisis highlighted the fact that the leu was overappreciated and the market made the necessary correction. Over a relatively short period – from July 2007 to date – the leu weakened by around 35 percent. Over the same period, the prospects of economic growth changed dramatically: from an almost 9.4 percent growth rate in 2008 Q3 to a most likely significant decline in 2009 Q1. The monetary and fiscal policies will be resorted to with a view to adjusting to the new environment. In face of the crisis, the relatively large stock of private foreign debt and the increased market volatility made some economic agents believe that the early adoption of the euro could supersede the need for economic policy adjustments. Yet this is not a viable option, as adopting the euro prior to having achieved the main stages of convergence with the EU might pose serious threats in the future. The adoption of the euro today would mean to relinquish monetary policy before having ensured convergence sustainability, namely before removing all the imbalances we are facing today. The outcome would consist in monetary policy being designed by the European Central Bank (ECB). But the ECB policy might prove inadequate from the standpoint of the specific problems facing the Romanian economy.