From 1995 to 2007, the stock of credit to the private sector increased by more than ¾ of GDP, whereas households’ savings rates almost halved during the same period. Furthermore, the increase in indebtedness was mainly used to finance consumption and lowreturn investments, mostly in the non-tradable sector.
As a result, imports expanded and large current account deficits materialised, without a corresponding increase in the economy’s growth potential. A macroprudential policy and a countercyclical fiscal policy would have helped contain the risks associated with the expansion of domestic demand.