Nevertheless, the past two years have witnessed a squeeze in firms’ gross profit margin as a result of increased competition and the appreciation of the baht relative to other regional currencies. BIS Review 46/2007  3  And as for the banking sector, which was at the center of the crisis, painful financial restructuring has now bore fruits. The banking sector has gained strength, with stronger profitability. The level of nonperforming loans has been cut down by four-fifth from its peak in 1998 to about eight percent in Q3 2006. And with the BIS ratio of nearly 15%, the banking system appears well cushioned to unexpected shocks. Finally, the fiscal sector benefits greatly from the economic upturn. Increasing corporate profits and consumption spending have resulted in higher tax revenues, allowing the government to strengthen its fiscal position significantly. Public debt to GDP has declined and is currently at only 41% of GDP. Ladies and gentlemen, I hope my account of these selected developments has shown you how far the Thai economy has come since 1997. The improvement was not due to luck or natural recovery process. It took a concerted effort by both the public and the private sectors to enable this turnaround. A natural question that follows then is whether this renewed dynamism will be sustained and this leads to my second point. 4  BIS Review 46/2007  That is, despite important challenges both domestically and externally, the medium-term outlook of the Thai economy remains positive.
Bandid Nijathaworn: Thailand’s economic outlook – an update Speech by Mr Bandid Nijathaworn, Member of the Board of the Bank of Thailand, at the Australian-Thai Chamber of Commerce dinner talk, Bangkok, 14 July 2010. *  *  *  First, let me thank the Australian-Thai Chamber of Commerce for the invitation. This year has been a particularly challenging year for Thailand, on account of both developments in the global economy and the political situations at home. So, what I want to do today is to give you an update on Thailand’s economic outlook, particularly to see what these challenges have meant for the Thai economy, as well as for the outlook going forward. A keyword this year is “uncertainty”. As you well know, the market does not like uncertainty because it raises risk and costs. For the global economy, this year has been an exceptionally “complicated” year because of the two major uncertainties that have contributed to an unusual degree of volatility in global financial markets. The first is uncertainty surrounding the strength of global economic recovery which has been weighed down by the high levels of unemployment and slow bank-lending growth in the advanced economies, as well as prospect for higher long-term interest rates in the major economies linked to the financing of public sector deficits. This is the first uncertainty. The second uncertainty is policy.