Our assessment is that, if the economy continues to evolve in line with our expectations, we are likely to see only modest increases in financial stress among domestic borrowers, despite clear challenges for some groups of borrowers. Turning to the domestic banks, higher levels of bank profitability are likely to continue under our central assumptions.
Financial sector reforms were carried out in two phases. The first phase of reforms was aimed at creating market-oriented financial institutions operating in an environment of operational flexibility and functional autonomy. The focus of the second phase of financial sector reforms has been on strengthening of the financial system consistent with the movement towards global integration of financial services.