6. Conclusion
Having surpassed, at end 2001, the milestone precrisis real GDP level of 1996, Thailand’s economic recovery has accelerated in the past few years. A contributing factor has been the considerable progress already made in restoring the imbalances that were at the root of the crises-in particular the enormous external financing gap as well as a relatively
accommodative fiscal-monetary policy mix.Nevertheless, weaknesses remain at the sectoral domestic levels. Most importantly, the banking and corporate sectors continue to be weighed down by a large stock of unresolved nonperforming loans. A still weak banking sector and the resulting constraint on loan growth explains much of the recent developments in the macroeconomy including historically low inflation and interest rates, an asymmetric growth pattern, and reduced effectiveness of monetary policy.
Despite sizeable increases in the use of nonbank sources of finance, the private sector in Thailand still relies heavily on the banking sector. As such, the speedy resolution of remaining problems on bank is balance sheets is crucial in reestablishing the single most vital link between savers and productive activity in the Thai economy. While the relative
strength of household balance sheets should facilitate consumption to expand further, medium-term growth remains constrained by balance sheet weaknesses in the corporate and financial sectors that continue to limit investment growth. In this regard, a re-opening of the TAMC to private banks could also be beneficial so long as the rules are fair and
transparent.