Given our robust cushions, Thailand’s financial sector has been relatively shielded from global market volatility: high reserves (220 bn USD, 2.9 times of short-term debt) and low external debt (38.7% of GDP). 4. While we see higher bond yields in the US and Thailand, the impact on real economy would still be limited. Why? Thailand is a bank-based economy where 75 percent of the private sector finance their activities through banks. Reliance on the bond market mostly relates to larger corporates with strong balance sheets and thus limited vulnerability to bond yield movements. Moreover, bank financing is mainly from deposits, not wholesale funding through the bond market. (3) Low stagflation risks Whether the country will face stagflation risk depends very much on both inflation and stagnation factors. 1. Inflation is mainly supply-side driven and self-correcting by this year. As I have outlined earlier, price spillovers have not spread much. Demand-pull inflationary pressures have been well contained, while wage pressures remain low, thus limiting adverse feedback between prices and  4  wages. We expect that, as supply constraints and cost-push pressures start to subside toward the end of this year, inflation will thus return to the target range. 2. Economic recovery is resilient. a. No sign of broad-based slowdown expected in stagflation. Despite the lower-than-expected Q2 GDP outturn, we are certain that economic recovery has already begun and is gaining traction.

Actual membership in the Banking Union will further deepen our partnership with the ECB, the Single Supervisory Mechanism and the Single Resolution Mechanism. Regarding supervision, according to the European Central Bank’s rules the ECB will supervise the biggest banks in Bulgaria and the BNB’s experts will participate in joint supervisory teams. This joint work will cover the off-site supervision aimed at on-going risk monitoring and assessment and also the on-site examinations in banks operating in Bulgaria. The other banks in Bulgaria will remain under the BNB’s supervision, but supervisory information about them will be exchanged with the ECB continuously. The joint work with the ECB will also cover many spheres of the practical organisation and operation of banking supervision. For example, the BNB’s experts will have direct access to the overall analytical expertise in the Single Supervisory Mechanism. Historical experience shows that the accession to this mechanism generates new synergy between the national competent authorities and the ECB, and it is a two-way process. Along with joining the Single Supervisory Mechanism, Bulgaria will also join the Single Resolution Mechanism. This would imply distribution of responsibilities and powers between the Single Resolution Board and the BNB as the national authority for resolution of credit institutions. Bulgaria’s legal framework for joining the Single Resolution Mechanism is already in place. The preparation for joining the Single Resolution Fund, including for calculating banks’ contributions to the Fund, and the preparation of the bank resolution planning process after joining the Single Resolution Mechanism are very advanced.