5 After four years of low or negative growth, the economy expanded by more than 3% in each year since 2005. At 6.5% the unemployment rate is at its lowest level in eight years, and the annual rate of change in productivity has returned to more acceptable levels after years of negative or marginal growth. Reflecting this general improvement, macroeconomic imbalances have also declined. The fiscal deficit contracted from almost 8% of GDP in 1999 to an estimated 1.6% in 2007 and the public debt/GDP ratio has gone down to 63% from a peak of 73% in 2004. The other Maastricht criteria, of course, were all met in good time and in a sustainable manner. Meanwhile, the current account deficit dropped from the 6 - 8% range in the first years after EU accession to around 3% in 2007, and is expected to drop further as the fiscal consolidation programme continues to unfold. At the same time, the private sector appears to have adjusted well to the changing composition of domestic and external demand. Not only has there been a shift away from public sector employment to private services - the share of the public sector in employment shed five percentage points to 30%since 2000 - but there has also been a move away from low value manufacturing activities to skills based services.
This data constraint could also become an issue for some developed markets, given a structural break in data due to the financial crisis and market dislocation. On top of these, there is the issue of level playing-field, as the structure of bank asset and liability in emerging and developed countries may be significantly different. We have found several policies that may have impact on level playing-field, between countries and business models of banks. An example is the application of a simple leverage ratio, which does not take into account inherent risk, because this would tend to penalise banks in developing countries that generally hold less risky assets compared to developed countries. In addition, macro-prudential measures, such as leverage ratio, could likely have a macroeconomic impact, possibly similar to use of liquidity reserve requirement as per classic monetary policy tool, and thus coordination with macroeconomic policy is vital. For central banks with dual role, this is less of a challenge, but for separated regulators, the issue of organisation structure once again comes into play. Turning to the Bank of Thailand’s involvement on these regulatory debates through various international forums – such as the bi-monthly BIS Governor Meetings, the Standard Implementation Group of BCBS, of which we are a member – we have proposed that developing countries be invited to participate in the formulation of new standards right at the beginning, rather than to be included at the later stage of implementation.