Social benefits were improved during this time. Compensation for sick leave was raised and the qualifying day was abolished. Furthermore, legislation was introduced for job security and co-determination in the workplace. Many believe that firms’ costs rose and that production was disrupted by sick leave and other kinds of leaves of absence that had also been introduced. These factors are difficult to assess but it is likely that they contributed. At the same time as the oil price shock, the Swedish economy was also hit by a domestic cost crisis which resulted in a decline in production. In spite of this, firms retained employees to a greater extent than in other countries, which led to lower growth in labour productivity. 2  BIS Review 56/2003  Moreover, in the mid 1970s, there were dramatic changes in capital formation, which undoubtedly explain some of the slowdown in productivity growth. Of course, this capital growth is in turn the result of a variety of economic conditions for enterprise and the public sector, including those mentioned earlier. For the most part we speak about investment activity in our country in gross terms. This concept also includes such investment that is needed to replace the depreciation that occurs during all production. When we exclude the part of gross investment that is made to compensate for this depreciation, we are left with net investment. Net investment is the new additions to the capital that is already employed in production in the form of plant, machinery and buildings.
For example, episodes of volatile capital flows may return, while the economy’s long-term competitiveness remains in need of improvement. Policy objectives in 2011 The Bank of Thailand envisages two economic policy objectives this year: (1) to safeguard macroeconomic stability, and (2) to continue strengthening underlying fundamentals of the economy. Both objectives should be interpreted in the broad sense, for example, macroeconomic stability entails price stability, financial stability, as well as fiscal sustainability. Likewise, strong economic fundamentals encapsulate resilient private sector, efficient public sector, and sound banking sector among others. Given these broad goals, the Bank of Thailand and everyone all have parts to play. The government, for example, is in charge of ensuring a sustainable fiscal position in the long-term, and an efficient disbursement of budget so as to best strengthen the economy. Monetary policy Maintaining economic balance is key to the making of monetary policy, as it is one of the most important pre-requisites of macroeconomic stability. In practice, this means that as the economic activity returns to normalcy, monetary policy stance must similarly be normalized. Failure to do so will add undue pressure on inflation, ultimately posing risks to macroeconomic stability. Thus this year, the monetary policy committee (MPC) will need to continue normalizing monetary policy. The amount and pacing of policy interest rate adjustments this year will be consistent with the outlook for growth and inflation as well as the surrounding risks.