For example, we monitor excessive credit card loans to sub-par debtors, excessive foreign exchange speculation, and formation of a real estate bubble. Apart from abovementioned policies, the managed float exchange rate regime helps maintain stability in capital flows. Under this regime, Thai Baht is allowed to move in line with the market forces but gives the central bank ability to influence the exchange rate in the time of excessive volatility. All the mentioned policies have helped to keep the current economy in good balance. Today, capital flows, private sector balance sheets, as well as real estate values remain healthy, which should enable fast recovery. Although the economy is anticipated to recover after private confidence regains, some notable risks must be addressed and closely monitored over next year. One that is worth mentioning is the expected U.S. interest rate normalization after recovery of the U.S. economy, which could lead to capital flow volatility in Thailand. Even with headwind from the Fed’s action of hiking policy interest rate, we anticipate only limited impact on overall Thai economy as the market has already gradually priced in the Fed’s stance since last year. Additionally, our reserves remain high, allowing the economy to be cushioned from the possible outflows of capital. Moreover our managed float exchange rate regime automatically stabilizes against possible volatility. At the same time, household debt, currently at 83% of GDP, requires a long-term solution. While its effect so far remains contained, its risk cannot be ignored.
Public sector borrowing and domestic financial market The draft-budget 2017 envisages domestic borrowing amounting to ALL 19.8 billion. The liquidity situation in the domestic financial market and the low interest rates provide the premises for accommodating the aimed borrowing level. However, the Ministry of Finance and the Government of Albania should give due attention to the even distribution of borrowing and budget expenditures, in order to reduce domestic markets’ volatility. Also, the Ministry of Finance should constantly monitor the absorption of borrowing in domestic financial markets, in order to enable the constant re-calibration of debt instruments with market requirements. *** Concluding, the Bank of Albania would like to present some suggestions, which – in our opinion – would contribute to the process of drafting and implementing the Budget in the future. 4. Suggestions and recommendations 4.1 Forecasting, Uncertainty and Risk Management The forecast on the revenue of the budget – like any other economic forecast – is surrounded by uncertainties and risks. The proper acknowledgment and understanding of this fact necessitates measures to identify and quantify them, and paves the way to effectively manage the possible consequences. 3/5  BIS central bankers' speeches  In line with our previous suggestions, Bank of Albania deems that the drafting and implementation process of Budget would benefit from the establishment of alternative budget scenarios, which would be implemented in the event of large deviations from the forecast.