2 As for the household sector, even though the level of debt had risen somewhat in the recent years, approximately 85% of GDP last year, the decelerating growth provides us a relief. The transparent and prudent macroeconomic policy frameworks, used for both fiscal and monetary policy, also command trust from investors and the public. For these reasons, the reputable credit agencies have still reaffirmed their positive assessment of the Thai economy. Indeed, the recent economic conditions have underscored the importance of preserving sound macroeconomic fundamentals in order to create resilience in the face of unexpected shocks. Domestically, the recent economic slowdown has put some small businesses and indebted households under financial strains. Loan quality has deteriorated somewhat, with NPL increasing slightly as a result, but these risks have been contained to specific sectors. The banking system and corporate sector remain strong and have coped with the slowdown well, owing to their improved risk management policies. Externally, like many emerging markets, Thailand faced a couple episodes of capital flow volatility in recent years. The economy, however, has withstood these challenges reasonably well. For instance, during the “Taper Tantrum” in May 2013 and our own political unrest towards the end of 2013, Thai baht had swung by more than 10 percent in a year, fluctuating from 30 baht per US dollar to 28 and back to close to 33 baht. Despite this volatility, market reactions (in terms of outflows) have been relatively dampened.
Slide 1  1  4  BIS central bankers’ speeches  Slide 2  Dynamism During the Reform Process Dovernment pushing infrastructure and investment projects  Anti-corruption measures delaying government spending and investment  3  Slide 3  Thailand Profile 1997  2005 2014E  Inflation  5.6%  4.5%  1.9%  Current Account  9.3  -7.6  8.6  NPL  42.9%  10%  2.3%  D/E Ratio of corporate sector  5.1  1.3  1.3  Household Debt  n/a  54%  85%  Public Debt  42%  51%  46%  (Billion USD)  (% of total loan)  (% of GDP) (% of GDP)  Note: 2014 numbers as estimated; NPL as of Q2, 1998  BIS central bankers’ speeches  5  Slide 4  Reform Efforts: National Reform Council  DECENTRALIZATION  EQUALITY  ANTI-CORRUtTION  INTRA-REGIONAL COatLEaENTARITY  Slide 5  State-owned Financial Institutions (SFIs) in Thailand Ministry of Finance tolicy-maker  hwner  Bank of Thailand wegulator  SFIs  6  BIS central bankers’ speeches  Slide 7  15 YeMrs of HnflMtion TMrgeting (HT) % 10 8 6  Headline Inflation 4.4% Pre-HT  2.6% Post-HT  Transparent  Clear target  deliberation  Independence  process  4 2  tolicy  0  Credibility  -2  1985 1990 1995 2000 2005 2010  Monetary policy target for 2015 : Headline inflation 2.5 ± 1.5% (annual average)  BIS central bankers’ speeches  7