domestic demand which continues to be the main growth driver for the thai economy. private consumption would continue to benefit from the first - car tax rebate program as well as the reduction in personal income tax which would take effect this year. furthermore, private investment continues to expand steadily on positive growth prospects, post - flood reconstruction in some parts of the manufacturing sector, and various government stimulus measures. meanwhile, exports started to show signs of a broadbased recovery, and should pick up pace in the latter half of this year, lending an additional support to growth momentum as the effect of government ’ s stimulus wanes. inflationary pressure meanwhile should remain contained. the impact of the second minimum wage hike on inflation is expected to be limited, as most businesses manage to keep a lid on cost via increased production efficiency, encouraged in part by a highly competitive goods market. the bot will however continue to closely monitor any inflationary impact of the wage increase. policy challenges for 2013 while it may seem that the worst is behind us, one must continue to be vigilant of risks. it is crucial for policy to be forward - looking and proactive, quickly adjusting to changing environment and shifting challenges. as i have mentioned, the key immediate challenges is to preserve the right balance of policy mix, in order to ensure that each policy ’ s effectiveness is maximized and grounded on the basis of sustainable economic well - being, as well as safe and sound financial system. toward these goals, the bot has a number of functions to perform. monetary policy and exchange rate policy the overriding objective of monetary policy continues to be the safeguarding of economic stability, which encompasses the dimensions of growth, inflation, and financial stability. this year, a key challenge will be in striking the right balance between providing sufficient support to growth while ensuring that financial stability is also preserved. in particular, a prolonged accommodative monetary policy may pose risks to financial stability if it bis central bankers ’ speeches encourages excessive debt accumulation, or induces overinvestment in risky assets as investors search for higher yields. financial imbalances or a bubble may develop as a result, further complicating policy decisions. thus, the bot will continue to closely monitor credit developments and household ’ s debt servicing ability, especially for the lowerincome group. another key challenge will be the management of volatile capital flows, and implications of exchange rate movements on the real economy. in meeting this challenge, the bot has at its disposal various policy

options, ready to be deployed under different circumstances. the recently announced capital account liberalization master plan was aimed in part to encourage thai companies to diversify their investments abroad, including towards neighbouring countries, and operating their businesses more efficiently using local currencies. the initiative would help foster more balanced capital flows, and promote financial market development that facilitates the regional integration under the asean economic community ( aec ) in 2015. we will continue to support businesses in strengthening their abilities to cope with exchange rate fluctuations. financial institutions policy it is now universally recognized that economic growth and financial institution development must proceed hand in hand. the development of financial institutions in thailand has indeed seen a significant and continuous progress, which has greatly helped support economic activities over the years. still, many steps must be taken to further enhance the financial system and promote a more efficient intermediation. to deepen financial access, the bot will cooperate with relevant agencies to allow commercial banks and non - banks to offer microfinance services, under the business model appropriate for risks and behaviour of the targeted group. at the same time, it remains our priority to reinforce the stability of financial institutions by strengthening capital base and improving risk management, to cushion against potential shocks under adverse circumstances. this year, we will establish a licensing framework for foreign commercial bank subsidiaries, with a view to enhancing the competitiveness of the banking industry as envisaged in the financial sector master plan phase 2. meanwhile, a guideline will be laid out allowing domestic commercial banks to expand and integrate into the qualified asean banks ( qabs ) network under the aec. this integration offers an opportunity for thai banks to step up their efforts to fortify their strategic strengths and prepare for a fiercer competitive environment. stronger institutions could seize the opportunity to expand internationally and diversify their risks. a balance must be struck between the three objectives of increasing financial service efficiency and access, safeguarding financial system ’ s integrity, and strengthening consumer financial protection. payment systems policy the priority this year will be to expand the coverage of the icas across the country, to speed up the provincial cheque collection from 3 – 5 business days to 1 business day. the initiative will help promote a more efficient payment system, enabling fast, safe, and secure economic transactions as well as promoting a substitution of electronic for cash payments. in doing so, the bot will collaborate with relevant agencies in developing the payment infrastructures that support not only domestic electronic payments, but also cross - border ones, which require risk