In the case of Thailand, headline inflation peaked at 9.2% in July last year, but has fallen dramatically to -0.4% in January. While it is natural for forecasts to be revised in light of new developments and information, a concern arises that globalization is likely to have changed the various relationships in the economy. This is particularly timely now, when fear and uncertainty takes over rational behaviour. And if our models are still based on assumptions which have not incorporated these changing relationships, then we are likely to make systematic errors in our forecasts. As a result of this volatility in inflation and the marked slowdown in global output, many central banks have had to reverse their tightening cycles – originally conducted to tackle inflationary pressures, while others have pursued an aggressive easing of monetary policy to shore up growth and fight off prospects of deflation. Many countries, including Thailand, had to do both. This in turn, also becomes a concern for the central bank if frequent revisions or the abrupt reversal of the central bank’s monetary policy stance affects the public’s perception of the central bank’s credibility. As a result of the speed and magnitude of deterioration in economic conditions, central banks across the globe have pursued extremely aggressive monetary policy easing, with the intent of actively supporting their domestic economies against the global slowdown. This situation has led us to the second challenge to monetary policy – namely the challenge to its effectiveness.

Monetary policy has been designed and implemented in line with midterm country’s macroeconomic program: with specific focus on price and financial stability Let me now briefly summarize what I believe are the latest most important developments, and outline our economic outlook. Economic growth After the significant electricity shortages at the end of 2005, it appears that traditional growth promoting industries like services (tourism) and construction are growing at a stable pace, contributing at a sustainable economic growth. Building upon these developments as well as other positive indicators, we expect the economy will grow at a solid rate of 5-5.5 percent. The main challenge remains ensuring sustainability of these growth rates, even higher in the long run. I believe that respective Albanian authorities have already identified the major priorities of these challenges which fully converge with Bank of Albania views. Just to remind you I would briefly summaries some of these priorities. Building new, preferably alternative, energy sources and improving the efficiency is top priority. In our view, sufficient and reliable energy supply remains a main concern to achieving economic growth. Providing a solution to this problem is a priority in the verge of increasing global demand and energy prices. Speeding up the privatization process of the remaining state assets is another important step forward. Special attention should be paid to structural reforms, particularly property rights and legal framework. In our opinion services, construction and in particular agriculture will remain driving forces of the GDP growth in the coming years.