Tarisa Watanagase: Prospects and challenges for the Thai economy in 2010 Dinner talk by Dr Tarisa Watanagase, Governor of the Bank of Thailand, at the British Chamber of Commerce, Bangkok, 30 November 2009. *  *  *  Distinguished Guests, Ladies and Gentlemen, First of all, I would like to thank the British Chamber of Commerce for inviting me to be here tonight. It is my pleasure to join you once again at this prominent annual gathering. Last year we had a fruitful discussion on “What determines the future of the Thai economy”. If you may recall, I imparted on the audience some words of wisdom for all policymakers, which is to smooth short-term pain, and to achieve long-term gain. Last year’s speech took care of the latter part, in which the key message was a call for collective efforts to raise the economy’s potential output in order to achieve sustainable long-run prosperity. We, however, did not spend much time on the former part as we were yet to witness the complete fallout from the collapse of Lehman Brothers. Today, we all know that our get-together last September was at the onset of the greatest economic contraction over the last 60 years. The collapse of Lehman Brothers on Sep 15, 2008 created a gigantic shockwave in the world financial markets with its ripples subsequently evolving into an economic tsunami that wiped out so much economic wellbeing all over the world.
The MPC, therefore, decided to maintain the policy interest rate at 1.25 percent per year  2  BIS Review 164/2009  during the most recent meeting. At the same time, the BOT is expecting that the Thai economy will return to a positive growth of 3.3–5.3 percent in 2010. Ladies and Gentlemen, I believe we have a consensus that the worst of the global economic crisis is already behind us. At this juncture, policymakers and businesses are starting to look beyond the crisis and gauging what lies ahead. At the Bank of Thailand, we envisage the following three challenges for the post-crisis era. First, the outlook for Thai export market will not be as good as the pre-crisis period. This is because the global financial crisis is likely to reduce both the purchasing power and the potential growth of Thailand’s major trading partners, especially the industrialized economies. Moreover, as the unemployment rates continue to increase in the G3 countries, protectionist sentiment may be intensified in an attempt to protect jobs at home. It is a common knowledge that, since the 1997 financial crisis, Thailand has relied on exports as our primary engine of growth. This dependency is expected to continue for quite some time as our domestic demand is not large enough to substitute the purchasing power from abroad. Therefore, exporters need to be more adaptive, while policymakers need to ensure supportive policies.