Vulnerabilities in the financial sector include public and private debt accumulation, increasing prospective credit losses and weaker profitability in the banking sector, and greater risk-taking in the non-bank financial sector. All of these vulnerabilities, which I will now address in more detail, warrant close monitoring.
First, massive fiscal support has preserved production capacity so far, but has also led to sizeable budget deficits for 2020. As the new wave of the pandemic is weighing on the recovery, it is important that this support is maintained and, in some areas, even scaled up in the coming months.