In addition, their profitability will help enhance their capital base over time. Last but not least, inflationary pressure is stable due to a substantial fall in oil price from last year. Headline inflation, though currently in negative territory, is expected to gradually rise, and turn positive in 2016. Deflationary risks remain contained as demand continues to expand, and prices of most non-energy items remain stable or trend upwards. Such inflation trajectory is consistent with medium-term expectations of the public and the Bank of Thailand’s medium-term inflation target. Overall, the economy and our financial system show a good sign of stability and resiliency. BIS central bankers’ speeches  3  Let me now turn to implications for the real economy and begin by giving you some positive news, that is, the economy is likely to register stronger growth momentum next year. Tourism continues to show good prospects where the number of tourist arrivals is likely to exceed 30 million in 2016. Fiscal stimulus will continue to be a key growth driver. Public expenditure is expected to increase by more than 200 billion Baht from this year, providing support to the economic recovery, especially the construction sector. In the private sector, there are signs of investment expansion in construction, telecommunications, and alternative energy, among others. Although we may see export contraction in 2015, there are resilient spots in certain sectors. Exports to CLMV economies have experienced strong growth, and continue to show great potentials from which Thailand could capitalize.

In line with the trend of regional currencies, the Baht’s recent movement has been largely influenced by external factors. Any eminent signals of the Fed’s initial hikes, or worse-than-expected data coming out of China, would prompt capital outflows from Emerging Markets, thereby weighing down their currency values. Significant outflows could tighten financing conditions of domestic companies, in terms of both “cost of funds’ and “availability of funds”. Such interplay of several risk factors is a challenge for business managers and investors alike. However, international investors, like many of you here, have been increasingly selective in their portfolio decision. They no longer treat Emerging Markets collectively as a single asset class, but have shown to differentiate between Emerging Markets. As such, even though Emerging Markets may generally move in the same direction, the actual adjustments across individual markets have been uneven. In this context, the degree of Thai Baht depreciation ranks within the middle of the regional movements – and our currency also closely tracks regional peers – while the level of volatility is moderate relative to peers. This owes much to Thailand’s sound external position which provides cushions from volatility in the global financial markets, shielding the economy from any potential undesirable. An economy with strong buffers could be likened to a car with good suspension, which could smoothly go through a bumpy road of global financial markets volatility. In fact, on the external stability front, Thailand performs well across several metrics.