Compared to some countries at this time, the banking sector in Thailand is functioning normally, with the financial markets remaining relatively stable despite greater volatility and uncertainty in the global economy. At the Bank of Thailand, we are optimistic that policy efforts at the global level will be successful in stabilizing the financial markets and in providing a comprehensive solution to the current crisis. Nevertheless, our view is that the adjustment that follows, and hence the process of global recovery, will probably take time. More importantly, in the Thai context, given the global nature of the crisis, and the fact that our economy has been affected mainly through contagion, it will be difficult for an economy like Thailand to achieve a sustained recovery on our own, if the global economy does not recover. Therefore, in the context of policy, the focus of policy response in Thailand should be on helping the economy and the private sector to adjust to the impact of the crisis, while ensuring that the key economic institutions and systems 6 most importantly the banking sector 6 continue to function normally, so that the economy will be in a position to move forward quickly once the crisis storm passes. BIS Review 45/2009  1  It is in this context that the Bank of Thailand has been shaping our response to the current economic downturn.
Domestic credit growth slowed to 6.8 percent in February while deposits grew by 6 percent. Contraction in economic activities further eased the pressure on prices, with headline inflation declined to a minus 0.2 percent in March. Given the sharp dislocation in economic activities in the last few months, market consensus now seems to agree on a small negative growth for Thailand this year, but with an improvement in growth next year. This means the market expects the Thai economy this year to go through a period of sharp adjustment on account of the global slowdown before growth is resumed next year. This view is consistent with the current mainstream view that, with the strengthening of the policy efforts at the global level, the world economy should look better next year compared to this year. As for the Bank of Thailand, our Monetary Policy Committee in its meeting next week, will also be going over this same question in assessing the near-term outlook for our deliberation of monetary policy. Whatever growth numbers we come up with, they will be conditional upon the prospects of the global economy going forward, especially after the G-20 announcement of the new global policy. Turning now to a more positive note, regardless of the adjustment we have to go through this year, or even next year, the Thai economy at this time is fundamentally stronger, and is in a better position to weather the crisis, compared with the situations we were in ten years ago during the Asian financial crisis.