me to highlight a number of thailand ’ s fundamental strengths that underpin this positive outlook. first, our corporate sector remains competitive with accumulated robust savings and profitability. this fact is well evidenced by their healthy balance sheets and their ability to explore investment opportunities overseas. net profit of most listed companies in the second quarter 2012 turned out be positive despite damages inflicted by the floods. with strong financial positions and more trade liberalization, an increasing number of firms have gone overseas, as indicated by a marked increase in thai direct investment from $ 3 billion in 2007 to $. 10. 6 billion in 2011. second, supportive fiscal and monetary policy has helped enhance growth while continuously strengthened stability in the thai economy. this achievement has been attributable to responsive fiscal and monetary policy, together with market - friendly regulations aimed at keeping the economy operating close to its potential. the rapid recovery from the great floods last year amid global economic uncertainty has revealed the importance of fiscal stimulus and government efforts in restoring public confidence. at the bis central bankers ’ speeches same time, the expansionary monetary policy stance has helped accommodate business restoration process. third, thailand has a strategically well placed - location for international investors to benefit from rising asian integration. the rise of china and the asean economic community ( aec ) evidently provide enormous opportunities for businesses operating in thailand to expand and prosper from enlarging market size and integrated regional supply chain. automotive and electronics industries are prominent examples that have long gained competitiveness after establishing complex supply chain - hub in thailand and obtaining a critical foothold in the region. finally, the thai financial system has been resilient to the global financial crisis. and the key reason for the banking sector ’ s resiliency is that our financial system remains relatively non - complex. the financial transactions are derived from real economic activities, and hence risks are understandable and manageable, with lending to domestic companies accounting for 70 percent of loan portfolio and the rest is mainly mortgage loan. the direct exposure of thai banks to european countries is also very small. investments and loans made by thai banks to europe are only 0. 3 percent of total assets, while claims on thai banks by european countries are even smaller at 0. 03 percent of total liabilities. nevertheless, we will be watchful of the second round impact of the eu crisis, particularly via impact on exports that could impact asset quality. apart from the existing solid fundamentals outlined above, thailand is currently striving to develop a more efficient financial system to

from the second quarter of 2023 onwards. the overall weakness in economic activity would reflect both that of consumption, which would decrease as a result of the decline in households'purchasing power, and that of investment in machinery and equipment, which would slow down owing to the uncertainty and the increase in financing costs. worsening international trade would also play a role. 1 / 9 bis - central bankers'speeches the second, more adverse scenario assumes a complete halt in russian gas flows to europe starting from the current quarter and significantly higher energy commodity prices. at the same time, international trade would slow down more markedly. in this case, gdp would contract by 1. 5 per cent in 2023 and inflation would exceed 9 per cent, about 2. 5 percentage points higher than in the first scenario. in light of the current challenging environment, the point estimates of these two scenarios are purely indicative and strongly dependant on the assumptions made on commodity prices and availability, which largely depend on developments in the conflict in ukraine. in any case, the risks to growth are tilted to the downside and, not only for italy, depend on geopolitical tensions and the economic outlook in the united states, where, also owing to the strong tightening of monetary conditions, many indicators anticipate a possible gdp contraction in the coming months. further negative repercussions could arise from a possible abrupt slowdown in the chinese economy, mainly in connection with the fragility of the construction sector, and from inflation remaining persistently high for longer than currently expected. inflation in the euro area came close to 10 per cent in september, mainly driven by the exceptional rise in energy prices ( over 40 per cent year - on - year ). inflation reached 4. 8 per cent net of the most volatile components – energy and food – which are the most affected by the conflict in ukraine. almost two thirds of the overall increase in consumer prices over the past twelve months appear to have been caused by the increases in energy prices, both directly and through the impact on production costs. this share rises to around four fifths if we factor in the impact of food prices which, although not energy - related, have also been affected by the conflict in ukraine. according to the european central bank ( ecb ) staff projections published in september, consumer prices in the euro area will grow by over 8 per cent on average in 2022 before gradually decreasing to below 6 per cent in 2023 and converging to levels close to the 2 per