Dr. Sethaput Suthiwartnarueput, Governor of the Bank of Thailand, delivered an exclusive keynote, “Robust Policies for Resiliency Amidst Uncertainty,” at Sasin School of Management on July 14. Speaking to an audience of over 160 members of the Sasin community, Dr. Sethaput explored how Thailand can build economic resilience in the face of today’s global volatility. Dr. Sethaput opened his keynote speech by addressing the issue of uncertainty: “What we are going through right now is a period of unprecedented uncertainty… you don’t know what the probabilities are, you don’t know what the shocks are,” he said, citing U.S. trade policies and tariffs as examples. He noted that in terms of improving the economy in this age of unprecedented uncertainty, we should try to develop resiliency. “What we should aim for is resiliency, rather than stability or a stable equilibrium,” said Dr. Sethaput, adding that resiliency is the ability to withstand shocks, absorb them, continue delivering core functions, and recover quickly, even though the economy may not return to exactly what it was before. “If you had a bowl and a marble at the bottom of the bowl, if you shake the bowl, the marble will come up—it will revert back to where it was before, or to the status quo. With an unstable equilibrium, if you overturn the bowl and put the marble on top, anything can cause the marble to set off,” said Dr. Sethaput. He reflected on Thailand’s financial crisis in 1997, noting that the country faced high vulnerabilities, including high levels of external debt, a large share of non-performing loans, and limited equity capital buffers. Reliance on foreign capital flows meant that when external financing dried up, Thailand was unable to borrow, triggering both a currency crisis and a banking crisis. It took the country a very long time to recover. He emphasized that to become resilient economically as a nation, it is essential to have robust monetary, financial, and regulatory policies. “The things that will get us resiliency are policies that are robust, appropriate, make sense, and remain valid even though the assumptions and circumstances may change,” said Dr. Sethaput. He added that when it comes to interest rates, it is better to set them in a way that is robust rather than simply optimal: “Get it roughly robust for a wide range of possible outcomes.” He also referenced the Tinbergen Rule, which can be applied to interest rates: “It’s a very blunt tool, but it affects a whole variety of things—any single instrument is used to achieve multiple objectives.”

“The world right now is highly uncertain, so it’s better to get things roughly right than exactly wrong!” – Dr. Sethaput Suthiwartnarueput, Governor of the Bank of Thailand

Another point he stressed was the need to develop a more dynamic ecosystem, where new firms emerge rather than relying on the same traditional firms. “The ecosystem in Thailand is not a system that is terribly dynamic,” said Dr. Sethaput, adding that being dynamic means having new firms emerge and scale, while Thailand seems to be dominated by large firms. In addition, when it comes to fostering innovation, he emphasized the importance of balancing innovation and risk. One caution is not to regulate too quickly, as regulating prematurely can stifle innovation. He added that the reason regulating quickly is harmful is because we often don’t know how it will play out or what unintended consequences may arise. However, it is also important to be clear about red lines and what we do not want to see.