Domestic macrofinancial conditions strengthened further in 2025, supporting continued credit expansion, although external vulnerabilities remained a concern. Credit growth accelerated markedly, with total credit extended by banks and Finance Companies (FCs) rising by end 2025. The financial sector’s exposure shifted further toward the private sector, driven by strong private sector credit growth, while exposure to the public sector contracted reflecting ongoing fiscal consolidation. Despite the decline, government related exposure remains sizeable. Financial intermediation improved, as reflected by the continued rise in the banking sector’s credit to deposits ratio.
However, the credit to GDP gap widened further into the positive territory of the credit cycle, underscoring the importance of maintaining vigilance over the potential build-up of systemic risk within the financial sector. Global uncertainties, including geopolitical conflict in the Middle East, volatility in commodity prices, and adverse weather conditions, could pose downside risks to credit quality of the financial sector. Against this backdrop, sustained fiscal consolidation and the strengthening of external sector buffers will remain essential to safeguarding macrofinancial stability.