Current Account Re-Ignites Devaluation Debate

The current account deficit remained above 25% of GDP in Q107, heightening concerns about the economy's competitiveness and the viability of the pegged exchange rate. With the economy on an overheated path and the trade gap at record levels, currency worries are likely to be a recurring theme over the next year or two. While the economy is becoming increasingly more vulnerable, threats to competitiveness have not yet reached critical levels and near-term external risks are mitigated by several factors.

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