rests crucially on setting the right policies to safeguard economic and financial stability. for this, i have an excellent team of people with the knowledge and experience to help me deal effectively with the risks and the challenges. on the financial stability side, the team is headed by dr. bandid nijathaworn, and on the monetary stability side, by dr. atchana waiquamdee, both of whom are here with me today. and with the excellent cooperation from our colleagues in the financial sector, i am confident that the banking sector and the economy will continue to make solid and sustainable progress. in closing, i would like to express my sincere appreciation to all of you who have contributed to our progress through your frank and candid dealings with us ; and the competition you have infused into the banking system that has benefited consumers and served the business community at large. indeed, orderly market competition is the most potent economic force that fosters progress. i hope that we will continue to build on this great relationship. ladies and gentlemen, tomorrow, march the first, the bank of thailand will implement a final review of the reserve requirement measure to give more flexibility to investors. fully hedged capital inflows for the purchases of bonds, mutual fund shares, and property fund shares will be exempted from the reserve requirement. in essence, all investment flows that are until today subject to the reserve requirement will be given a full - hedging option. with this announcement, let me conclude my talk this evening. thank you for your kind attention.

tarisa watanagase : the thai economy – risks, challenges, and opportunities speech by dr tarisa watanagase, governor of the bank of thailand, at the foreign bank association dinner talk, bangkok, 28 february 2007. * * * mr. chairman, distinguished members of the foreign banks'association, fellow bankers, members of the press, ladies and gentlemen, i am very pleased to be here today, and to have this opportunity to share with you some thoughts on the challenges and outlook for the economy and our banking sector this year. this forum has always been one where we can have frank discussions. and i very much look forward to hearing your views. indeed, open communication is the cornerstone of a healthy working relationship. today, i would like to focus on three key topics. first, the outlook for the economy, second, the immediate challenges for the economy and the banking sector, and third, prospects for the thai economy and the banking system in the medium and longer terms. let me begin with the economy. last year was a challenging year for all of us. the economy was buffeted by several negative factors. these included political uncertainties, high oil prices and severe flooding in many provinces. the combination of these factors led to increased upside risks to inflation, especially during the first half of 2006 ; and downside risks to growth. domestic demand softened, and robust exports on the back of strong global growth helped sustain the momentum of the economy. our policy response, namely monetary tightening, proved timely. and as a result, inflation and its second round effects have been well contained. headline inflation came down from a peak of 6 percent in the second quarter, to 3. 3 percent in the last quarter, and to 3 percent in january this year. meanwhile, external stability continues to improve, with current account turning into surplus, and a strengthening of international reserves to almost 67 billion us dollars. the economy proved to be quite resilient to external shocks. and growth momentum continued satisfactorily at 5. 1 percent for the whole of last year. but most of you are probably more concerned about prospects for this year and the next. this is understandable. this year, the economy will continue to face a number of important challenges. economic uncertainty has increased, as evidenced by declining investor sentiment and consumer confidence. outside thailand, the threat of a disorderly unwinding of global imbalances still persists. at home, the implementation of the reserve requirement and