Ex ante there were wellgrounded concerns about the inflation impact of the large VAT hike, a crucial part of the fiscal tightening measures. Central banks never welcome any administrative increase in the price level, there is always the risk that a part of the one-off increase will lead to more permanent inflation pressure.
The series for the proportion of loans for which repayments are in arrears by more than 90 days is shown in Chart 7. The key points worth noting about this chart are that: •  While arrears rates rose somewhat between 2002 and 2006, they remain relatively low by historical standards, and in fact fell through much of 2007.