other assets such as commercial real estate and consumer loans may come under greater pressure, affecting bank profitability. with profit declining, banks may become more risk averse to protect capital, putting more pressure on credit extension and the real economy. so, latest us data point to a weaker outlook ahead with more downside risks in the nearterm. the risks include further correction in the housing market, continued tightening of the credit conditions, and further decline in economic activities. outside the us, the economic picture looks less negative. while the adjustments in housing market are also ongoing in europe, and some european banks have reported losses in cdos, the impact on economic activities is expected to be more limited. for example, consensus forecasts in february, revised downward the euro zone ’ s gdp growth for 2008 by only 0. 3 percentage points from december compared with a 0. 5 percentage point downward revision for the us. for southeast asia, the impact is also forecasted to be limited. latest consensus forecasts for southeast asia ’ s gdp growth is 5. 7 percent for 2008, declining slightly from the forecast of 5. 9 percent in december last year. these forecasts, together with the latest data, suggest that, in the short - term, things will likely get worse before they get better, and the slowing of growth in the us will impact growth globally. the key question, at this time, is how deep can things get before we see a turnaround. this is definitely an important, but a difficult question to answer. market participants as usual will have a range of views, and i personally do not intend to offer another prediction. instead, i want to share with you my thoughts on the current developments and on what this will mean for thailand. to begin, one context that i think is useful in understanding the current turmoil is the unwinding of the global imbalance, triggered by corrections in the us housing market that began in 2006, and is now ongoing. such unwinding is a necessary process to clear excesses and reduce financial leverages that have been built up in the form of high level of the us ’ s current account deficits. economically speaking, to reduce the deficits, the value of the us dollar needs to fall and the levels of us long - term interest rates need to rise. exchange rate adjustment is very much ongoing. the us dollar has declined by about 8. 0 percent in nominal effective terms since 2006. and reflecting this, the us current account began

economy makes it more difficult than usual to interpret various economic indicators and to predict future developments. when weak figures are received from various sources, it is difficult to know whether they are the result of a slowdown in the economic recovery due to fundamental reasons, such as households wanting to increase their saving to compensate for the large stock market falls, or whether they are the result of an inability to act while waiting for the solution of the iraq crisis. the assessments of the economic situation and even more the oil prices are largely due to the assumptions made with regard to developments in the geopolitical situation. let me emphasise, before i go into this, what is actually obvious ; a war entails much more than just economic consequences of the type the riksbank has reason to observe in its inflation report - first and foremost considerable human suffering. let me also say that in this field - i. e. geopolitics - we are of course amateurs, although we have tried to use our international contacts when putting together our forecast. the riksbank's main scenario assumes a solution will be reached in the iraq conflict that does not give any reason to significantly reconsider the picture we have of a gradual recovery in economic activity. the surveys we have made indicate that the macroeconomic consequences of a brief war will not be so different from a less dramatic development. in this sense one can say that our main scenario is consistent with both a peaceful solution and a brief war. the inflation report describes in greater detail how we assess the effects of a worse development, which is, of course, a possibility. a weaker recovery an increasing number of indicators over the past few months have given the impression that the international economic recovery will be more protracted than anticipated. the main difference from the assessment we made in the december report, is the deterioration in prospects for the euro area. all in all, our assessment is that international growth will be slightly lower this year than we believed when making our forecasts in december. the fact that we have revised down the international growth forecast also means that we expect a slightly less strained resource utilisation in the global economy. the slightly slower recovery for the global economy will also have repercussions for developments in sweden. growth this year is now expected to be lower than last year and almost one half of a percentage point lower than we had reason to assume in december - 1. 7 per cent instead of 2. 1 per cent. consequently, we are also anticipating there