Improving loss absorbency of banks and the crisis management powers of the authorities are necessary, but it is even more important to make sure that excessive growth of credit and indebtedness can be better controlled in the future. In this way, credit crunches and banking crises can be made less likely – and milder, should they happen.
It was only in the latter part of the year that global developments began to have a significant impact on the economy. The contraction in output, and hence the widening output gap, combined with an easing in inflationary pressures, allowed for a change in the monetary policy stance.