While the export sector has continuously managed to achieve high productivity growth rates, productivity has lagged behind dramatically in the domestic sector of the economy. Since the domestic sector continues to represent the bulk of the Swiss economy (approximately 60% of GDP), the poor performance of the domestically oriented sectors undermines the growth potential of the Swiss economy.9 In light of the rapidly deteriorating  7  There are numerous useful definitions of globalization. Here I make reference to the one used by Ngaire Woods, ed. (2000): “The Political Economy of Globalization”, New York: St. Martin’s Press. 8  As a percentage of GDP, Switzerland’s current account surplus is exceeded only by that of Singapore. Switzerland holds net foreign assets of about 135% of GDP which is unmatched in the world. The biggest part of the Swiss current account surplus is therefore derived from the interest earned on these assets (36 billion CHF vs. a surplus of 25 billion CHF from services and a 4.5 billion surplus from trade in 2002). 9  GDP growth in Switzerland is underestimated by the official statistics because these do not fully take into account the improvement of the terms of trade that are regularly realised by the tradable sector (see Ulrich Kohli (2002): “Veränderungen der Terms of Trade und reales BIP” (Terms-of-Trade Changes and Real GDP: Evidence from Switzerland (with English summary), Schweizerische Nationalbank Quartalsheft, June, pp. 54-63.
Both figures are well below those of our regional peers, suggesting that we are relatively more immune to abrupt capital flights. On the external stability front, Thailand continues to perform well across most indicators. Last year, our current account recorded a large surplus of over 8% of GDP, and it is expected to grow further this year. Moreover, we continue to have more than enough international reserves to cover our foreign debt obligations. Our banking system continues to be strong, with ample capital buffer and cushion against bad loans. Their capital adequacy ratio continues to be well above the required level of 8.5%, and has increased slightly since my last address. Moreover, amid the gradual economic recovery, banks continue to accumulate high level of loan loss provision to cushion for deteriorating loan quality. The aggregate NPL figure remains manageable at around 2.7% and the combined profits of the banking sector remain sizeable despite being slightly trimmed by the additional loan-loss provisioning. Ladies and Gentlemen, Maintaining sufficient buffers have proved essential in coping with the financial turbulence of the past year, as they helped to shield the economy from facing the full impacts of external shocks. Besides the financial system, the real economy has also been a beneficiary of stable financial environment. In the first half of this year, the Thai economy expanded by 3.4%.