But nothing is certain when it comes to economic activity. One obvious source of uncertainty is the oil price, which has turned out much higher than we anticipated as late as in June. Forward prices, which reflect expectations of future oil prices, have also risen and judging by these, expectations in general seem to be set on a slowly falling, but nevertheless still high, oil price. Even though the oil price has dropped back recently we have revised up our forecast for the coming years. It is hard to judge what effects the high oil price will have on growth and inflation. Among other things, this depends on whether the high price reflects mounting demand or whether it has been caused by supply shocks. Pointing to the first explanation is the fact that the price rise in recent years has gone hand in hand with an increase in output. A dampening factor is that most industrialised countries are considerably less dependent on oil than they were a couple of decades ago. Against that background, we estimate in our assessment that the high oil prices will have limited effects on economic activity. But, of course, it is not possible to rule out either higher inflation or a more negative impact on demand. Signs of the former can be seen in the United States. Another source of uncertainty is the large savings imbalances around the world and how a correction might come about. Strong domestic demand in Sweden In Sweden, too, economic growth was strong last year.
A credit register will narrow the information gap that exists in the Maltese banking system by reducing asymmetric information between borrowers and lenders. It also improves risk management thereby contributing to a better performing loan portfolio and as a result, a lower cost of capital. Ladies and gentlemen, let me close with a few concluding remarks. As you are well aware, the banking sector across the Euro area is passing through regulatory and supervisory changes that are sometimes viewed as expensive and imposing unnecessary burdens on the sector. This is a short-sighted assessment. Though dividend pay-outs may be lower in the short-run, their sustainability will be strengthened in the longer term. Similarly, higher bank capital does not necessarily lead to lower volumes of loans over the long run. Instead, a higher capital base mitigates balance sheet risk, lowers bank funding costs, hence allowing banks to charge a lower risk premium on their loans, to the advantage of both lenders and borrowers. The crisis has uncovered various shortcomings in corporate governance in the banking sector, mainly in areas like risk management and internal controls, compensation, corporate structures and transparency. Some Maltese banks have yet to adopt a number of necessary risk oversight practices that would ultimately benefit the banks and their stakeholders. What needs to be stressed is that reputation is a key asset of Malta’s financial system which cannot be taken for granted. Efforts to safeguard financial sector reputation need to be ongoing and undertaken by all concerned in the financial sector.