By contrast, the risk premia for bonds of particularly burdened euro economies – namely those of Greece, Ireland and Portugal – continued to rise. Overall, the risk premia of certain European sovereign borrowers remain very high, and latent threats of contagion continue to exist. In the global equity and commodity markets, the mood during recent quarters was cautiously positive. In the equity markets, the gratifying corporate results had a strongly supportive effect. In the US, for example, around two-thirds of the most important corporations reported better results than were expected by the market. In the commodity markets, healthy economic conditions – especially in the emerging countries – assisted a continuation of the  BIS central bankers’ speeches  1  upward movement, although here, too, price volatility remained high. However, there were also factors weighing on the markets, like the political unrest in North Africa and the Middle East, the catastrophe in Japan and, finally, the indications of a global economic slowdown in the markets. To summarise, the situation in the international financial markets presents a mixed picture, despite the fact that economic developments are relatively favourable. This reflects the fact that the burden inherited from the economic and financial crisis continues to be very significant. Implementation of monetary policy The financial crisis was characterised not least by turbulence on the money market. While uncertainties in the international financial markets persist, the situation in the Swiss franc money market eased last year, and has been very relaxed since the beginning of 2011.

Ladies and Gentlemen, looking at the more medium-term prospects, I am convinced that the underlying fundamentals that have been attracting international investors to Thailand over the years are still in place. The country’s overall macroeconomic fundamentals remain  BIS central bankers’ speeches  1  sound against the back-drop of a healthy banking system, low and well-anchored inflation, and the government’s relatively strong financial position. A flexible exchange rate and our strong position in terms of international reserves provide ample cushioning for the central bank to be able to manage capital flow volatility. These solid fundamentals command trust from investors and credit rating agencies. Recently, Moody reaffirmed Thailand’s stable credit outlook citing that “in many respects, Thailand’s credit metrics remain well positioned compared with its immediate rating peers”. 6. Having said this, we cannot take things for granted. In fact, many problems point toward a need for structural reform. The MPC, in its last meeting, expressed concern over a number of structural issues, which, if not addressed, could restrain the country’s potential growth in the long run. These problems include fiscal sustainability, inequality in terms of both income distribution and access to education and health care, as well as supply bottlenecks such as a labor shortage. These problems cannot be solved by monetary policy, but require a concerted effort from all stakeholders. 7. In addition, as we are all aware, the prospect of the Thai economy is largely clouded by political uncertainty, which continues to impair the ability of the government to steer the economy forward.