This current plan helps promote competition in the financial market. Continuity of these plans and implementation over several years has improved Thailand’s financial infrastructure, as indicated by lower cost-to-income of commercial banks. Progress is especially visible in the SME segment. Promoting competition among players in the banking sector has steered banks to seek more opportunity in this segment. At the same time, the Bank of Thailand has helped lay down infrastructure that reduces the asymmetric information problem in this segment by means such as setting up the SME Database. With the convincing results of the current plan which will end this year, the Bank of Thailand has recently set up a steering committee to look after the next phase, Financial Sector Master Plan Phase 3. In addition to Financial Sector Master Plan, the Bank of Thailand also encourages Thai companies and depositors to diversify their investments and promote financial market development through the implementation of Capital Account Liberalization Master Plan. As a result, there is increase in the number of Thai companies doing outward Foreign Direct Investment which allows capital as well as resources to be allocated more efficiently. 4  BIS central bankers’ speeches  At this point, it is important to note that resources and infrastructure built by the government and central bank are not sufficient in themselves to lift the economy’s growth potential. More importantly, financial institutions and businesses must utilize them and act as the main player that will drive the economy to its highest potential.

These revisions in food prices drove our yearend inflation forecasts for 2014 and 2015 higher by 0.8 and 0.3 percentage points, respectively. Our medium-term projections are based on the assumption that tax adjustments and administered prices are consistent with inflation targets and automatic pricing mechanisms. Price increases in electricity and natural gas of 9 percent, which were released in early October, have slightly exceeded our assumptions in the July Inflation Report. Thus, our end2014 inflation forecast was revised upwards by 0.2 percentage points. We based our assumptions about the medium-term fiscal policy stance on the MTP projections covering the 2015-2017 period. Accordingly, we assume that a tight fiscal stance will be implemented and the primary expenditures to GDP ratio will taper off. 3. Inflation and the monetary policy outlook  Distinguished Guests, Now, I would like to present our inflation and output gap forecasts based on the outlook I have described so far. 8  BIS central bankers’ speeches  Our medium-term forecasts are based on the assumption that our tight monetary policy stance will be maintained by keeping a flat yield curve. A further assumption is that the annual loan growth rate will reach nearly 15 percent by the end of 2014 and stabilize around these reasonable levels on the back of the macroprudential measures. Accordingly, we expect inflation to be, with 70 percent probability, between 8.4 percent and 9.4 percent (with a mid-point of 8.9 percent) at end-2014 and between 4.6 percent and 7.6 percent (with a mid-point of 6.1 percent) at end-2015.