Rapid technological advancements could increase volatility and inequality and keep inflation at a low level, while countries that fail to adapt to the changes could experience tepid growth, says the central bank chief.
“The world has been in the stage of multiple lows such as low growth, low inflation and low interest rates while facing high volatility and high inequality,” Bank of Thailand governor Veerathai Santiprabhob said at a seminar entitled “Searching for the Future… Thailand 4.0″, which was hosted by the Thailand-China Business Council.
He said the fast pace of technological development could also intensify current conditions that the world is facing and those countries which fail to keep up could be left out of the global economic recovery.
Veerathai said that as technology helps deepen connections between financial markets in every country, the volatility in these markets will also increase as shocks in one country could affect others in a matter of seconds.
He said inequality could also increase as those with higher capital can better access new technologies and benefit from them, subsequently widening the gap between high and low-income earners.
Technological developments could tame inflation to stay at a low level as new technologies could lower prices of many goods and services, while the adoption of automation in the manufacturing sector could help produce more goods based on the same production intake levels.
But technological advancements also create opportunities for those countries that can seize on them to grow their economies and help shift from an agriculturally-based economy to a service-based one, bypassing the industrial stage.
Veerathai said Thailand should continue to reform its laws and regulations to be able to benefit from these changes while equipping its citizens with the ability to adopt new technologies into their lives and businesses.
“Laws related to topics such as the sharing economy, cross-border activities through new technologies and privacy are still required in Thailand to develop into the 4.0 stage,” he said.
As the economic and political policies of developed countries became more unpredictable and volatile, Thailand and other Asian countries should continue towards regional collaboration in both the trade and financial sectors.
“The middle class in Asian countries such as China, India, the Philippines, Vietnam and Myanmar should present great business opportunities for Thailand to expand abroad,” said Veerathai.
The central bank governor said the Federal Reserve’s signalling of a coming rate hike is no surprise, as the US central bank has hinted at the move for a while.
“The trend for global interest rates will be for gradual increases towards normal levels as they have been quite low for some time,” said Veerathai. “But we [the Bank of Thailand] don’t want anyone to panic, as the increases will be very gradual and will not cause a sudden shock to the global economy.”
When asked about whether the Bank of Thailand should also increase its rate after the US, he said that the monetary policy of each state will mainly depend on the status of that country’s economy.
Meanwhile, Kobsak Pootrakool, assistant minister to the prime minister’s Office, urged Thai business operators to enlarge their footprint in the Asean region to cash in on deeper integration and rising purchasing power.
They should further ramp up local investment in line with the government’s infrastructure investment plan, he said.