Thailand Central Bank Statement

Author: | Published: 5 Sep 2017
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The pick-up in global growth outlook and international trade in 2017 has benefited Thailand, as reflected in steady improvements in merchandise exports and tourism. Our economy and financial system remain resilient on the back of the sound financial positions of the private sector as well as robust external positions from high international reserves and low external liabilities. Nevertheless, downside risks to global growth persist, especially from the uncertainties surrounding advanced economies' trade and monetary policies, as well as continued geopolitical tension. These factors could cause significant financial market volatility and stifle global economic recovery.

Given the challenging environment, the Bank of Thailand's focus anchors firmly on safeguarding price and financial stability. Our flexible exchange rate has served as the first line of defence against external volatilities. Monetary policy remains sufficiently accommodative to steer inflation back towards the medium-term target and support sustained economic recovery. Despite the sound financial system, pockets of risks emerge from SMEs' deteriorating debt servicing capacity and the search-for-yield behaviour of economic agents.

Looking ahead, the existing policy space can provide support to the economy if needed in the event of significant external and domestic shocks. In addition, a broad range of policy tools could be utilised to maintain macroeconomic stability.

To preserve economic and financial system resilience, we need to give high priority to the long-term structural challenges of Thailand's competitiveness, productivity and growth potential. The future of our country depends largely on the success of upgrading and unlocking economic potential. Therefore, the Bank of Thailand, in collaboration with other government agencies and financial institutions, has pushed forward various financial system reform initiatives.

Electronic payment infrastructure has been developed in light of technological advancements. The new faster payment system, PromptPay, and initiatives to encourage debit card usage will help bring down financial transaction costs. We also support the fintech industry, while balancing the risks and benefits by adopting a Regulatory Sandbox to provide a testing environment for fintech innovations. Approved projects include Blockchain technology for Letter of Guarantee (LG) and cross-border money transfer, as well as Electronic Know-Your-Customer (e-KYC) with biometric identity.

To promote Thailand's ease of doing business, the Bank of Thailand has launched the first phase of the foreign exchange regulatory reform to reduce compliance costs and facilitate foreign exchange transactions. With fewer rule and regulation hurdles, we can release resources to raise competitiveness and enable innovation.

Asian regional cooperation, not only in trade and investment but also in finance, has the potential to expand. In this light, we are working on regional connectivity enhancement by promoting the use of local currency for cross-border transactions. Furthermore, other initiatives that have been undertaken include the ASEAN Banking Integration Framework and Asian bond and capital market initiatives.

Recognising the imminent challenges ahead, we believe that Thailand's economic recovery is on a firm-footing, supported by the sound financial system and strong macroeconomic fundamentals. The Bank of Thailand will remain vigilant and stand ready to implement prudent policies in the context of fast changing circumstances to ensure sustainable economic well-being.




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