First, the Bank of Thailand will ensure ample liquidity in the system in order to accommodate the economic recovery. As policy normalization by the Fed is imminent, the risk of liquidity withdrawal from Emerging Markets increases. We anticipate limited impact on the overall Thai economy as markets have priced in the Fed’s initial hike. Besides, it is widely expected that the Fed fund rates would rise gradually from then on. As for now, despite the slow economic growth in Thailand, the overall credit to the private sector continues to expand at around 5 per cent. Furthermore, enterprises have issued a sizable amount of corporate bonds, leveraging on lower yields compared to last year. Commercial banks’ liquidity position is stable. All these are indications of favorable domestic financing conditions. Should a sudden reversal scenario occurs, the Bank of Thailand would make sure that liquidity will not become an impediment to economic recovery. The Bank of Thailand will also ensure that “cost of funds” is accommodative to the ongoing recovery. The two pre-emptive cuts in the policy interest rate earlier this year, in response to greater downside risks to growth, have eased domestic cost of funds. In addition, low inflationary pressure gives room for monetary policy to remain accommodative. This would ensure that the overall monetary conditions are conducive to the economic recovery. Nevertheless, we keep a cautious eye on risks to financial stability, especially under the prolonged low interest rate environment. Household debt, although it has stabilized, remains high in relation to GDP.

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.