The heart of the problem stems from lingering balance sheet weaknesses that continue to plague both the banking and corporate sectors. At the same time, excess capacity and uncertainty about future economic prospects have dampened the demand for credit. When firms are not eager to raise funds and banks are not eager to lend, higher liquidity in the banking system will not translate into higher liquidity in the economy. In this way, the slow pace of banking and corporate restructuring has contributed to the persistence of low inflation in Thailand-and deflation in others.