Overall, factors that affect inflation showed low activity intensity and prices of other goods of the basket do not signal for inflationary pressures on the economy. From the macroeconomic perspective, the downtrend of annual inflation is dictated primarily by rapid decline of pressures on the supply side, notably: slowdown of commodities price rise in international markets and low inflation in our main trade partner countries; cancelling out of the administered price rise effect; and stability of the national currency. Although these developments had been factorised by our analyses and projections, their influence was higher than expected. On the other hand, inflationary pressures originating from the aggregate demand continued to be low, in the context of below-potential economic growth and anchored expectations on inflation. Figures on real economy developments in early 2012 are scarce. Indirect statistical data, available for the monetary, fiscal and trade sectors of the economy, signal for slow economic growth in the first quarter of the year. As expected, aggregate demand was sustained less by the fiscal stimulus, in response to the prudent fiscal behaviour for 2012. Similarly, the contribution of foreign demand, during this period, is assessed as low, owing to economic activity slowdown in our partner countries. Moreover, despite signals for its recovery, the domestic private demand remains slow, given the consumers and private business hesitation to spend and invest. Fiscal sector data for January reveal positive budget balance for this year, about ALL 1.6 billion.

Hence the balance of financing sources will eventually have to shift. Policy makers have recognised the need for broader private sector participation. Long-term investors such as insurance companies, pension funds and sovereign wealth funds can be alternative sources of financing, as the life cycles of infrastructure assets match their long-term liabilities. However, these investors are not participating actively enough in the infrastructure space, especially in debt financing. I am sure we all recognise that there are many reasons including a lack of familiarity with the asset class and bespoke nature of infrastructure projects. Some see higher perceived political risks in Asia, and a limited range of investment instruments relating to infrastructure. To catalyse broader private sector participation to complement the traditional bank lending space, a few things could be considered. Firstly, we recognise that investors have varying risk appetites, and that the expertise to evaluate and undertake greenfield project risks still resides mainly with banks. Banks should therefore consider bringing in different types of capital at different stages as the risk profile of a project changes over time. For instance, transactions could be structured such that banks finance the construction stage of projects using their balance sheets, and the bank loan is then refinanced in the bond market post-construction. This way, institutional investors gain exposure to a steady stream of cash flows from operating projects, while banks can recycle capital to lend to new greenfield projects. There have been precedents in other parts of the world.