Bandid Nijathaworn: Thailand’s banking and economic outlook Keynote address by Dr Bandid Nijathaworn, Deputy Governor of the Bank of Thailand, at the Australian-Thai Chamber Luncheon, Bangkok, 3 April 2009. *  *  *  Let me first thank AustCham Thailand, especially President Andrew Durieux, for the invitation to speak at today’s luncheon. It has been almost four years since I last spoke at an AustCham event, so, it is a pleasure to be back. Today I will speak on Thailand’s banking and economic outlook, a subject which I am sure will be of interest to all of you. In keeping with what a good luncheon speaker should do, I will keep my remarks short and to the point, so that we will have plenty of time for desserts and for questions and answers. This week is undoubtedly an important week for the global economy, as leaders and finance ministers of the world’s twenty most important economies gather in London to map out a strategy that aims to comprehensively address the current global financial crisis. Up to now, policies to tackle the crisis have been left largely to the individual economies in response to the problems that arise. But as the crisis has mutated into a major global problem, a coordinated policy response at a global level is clearly needed to ensure a synchronized recovery in all the key parts of the global economy. Without coordinated and comprehensive policy response, a synchronized recovery will not take place.
And without a synchronized recovery, the world will be at risk of running into a weak, patchy, and unsustained recovery for a prolonged period. So, this week is really an important week, and what has been announced so far by the world leaders, in terms of the new resources that will be made available to aid the global recovery, is positive for the market and for the global economy. The current global crisis is now in its 20th month. My count is since the Federal Reserve took the unprecedented step to reduce its policy interest rate sharply for the first time in August 2007, signaling the serious nature of the problem. Thailand, being a small open economy, could not escape the impact of the turmoil. The impact on Thailand, so far, has been felt through a sharp reversal of capital flows, on account of deleveraging by foreign investors, as well as through a tightening of access to foreign capital, and through a dislocation in economic activities as export and tourism receipts fell sharply. The banking sector, however, has been resilient given the low direct exposure to the toxic assets, the low reliance on global liquidity as a source of funding, and the strong capital base. The fact that the Thai banking sector remains safe and sound is no accident. It is largely the result of continuing improvement in risk management capacity of the banking sector following the Asian financial crisis, under a stronger regulatory framework and risk-based supervision.