Speaking from Thailand's own experiences and limitations, we realize that both planned and unforeseen challenges will mark our path towards eventual compliance. As such, we have taken some initial steps to check the readiness of financial institutions to conform to the credit risk guidelines under the New Capital Accord. A full impact analysis will be conducted next year. Going some way to prepare for the more sophisticated methodology embodied in the New Capital Accord's treatment of credit and operational risk, we are requiring, as a first step in the same spirit, that financial institutions calculate market risk capital charge in 2002. Actual capital requirement will be made, tentatively, in 2003. Although the complexity of credit risk and internal rating approach will add new difficulties even after market risk is mastered, we believe this step will serve to focus the attention of top management of financial institutions and supervisors, ensuring they will stay alert to other complexities that follow. In this connection, we would like to take this opportunity to thank Mr. Roland Raskopf and Mr. Jason George, who last October were kind enough to give Thailand's banking community excellent, and much appreciated, presentations on market risk, after which we received many calls from awakened private bankers for advice on how to plan the adoption in their banks. I should also like to take this opportunity to express our appreciation to Mr. George, who spent three years at the Bank of Thailand as consultant to help us build up our supervisory capacity.
Broadly speaking, economic and monetary developments and prospects provide growing signs of an ongoing recovery, mostly indicating that the upswing will gain momentum during the coming winter. Some slack still exists in the economy, however. There are no clear signs of a turnaround in the labour market and seasonally adjusted unemployment has still not decreased. Leading indicators such as credit growth, business surveys of labour demand, and growing turnover and imports nonetheless strongly suggest that demand will rise in the near future. Boosted by increased quotas during the  4  BIS Review 45/2003  coming fishing year, more public sector construction projects and aluminium industry investments, a reasonable level of output growth can be expected this year. However, since the growth rate is below estimated potential, the slack in the economy will increase slightly compared with 2002. The growth rate in 2004 is expected to exceed estimated potential at 3½%, meaning that the output gap could turn positive next year. Inflation will nonetheless remain below the Central Bank’s target until the final quarter of 2004, according to the forecast. This is explained by the low current rate of inflation and excess output potential. Two years ahead, inflation is forecast to creep above the target. On the whole the future looks fairly bright, but as always we should not allow the celebrations to get out of hand. BIS Review 45/2003  5