Market outlook

Economy
After drifting onward without a clear direction, the economy seems to be on an upward path. This view,
shared by the majority of economists, is breathing new life into the wary consumer, with better times
seemingly ahead. Consumer confidence figures have been on an upward trajectory for months now, and
increasingly positive reports have been flowing in from the SME sector. Key export markets are behind
much of the newly found trust in better times. Basic materials and IT sectors have been particularly strong.
Housing is still expected to remain tepid, but some more attractive housing markets might see price
increases. Larger corporations have also shown increasing interest in mergers and acquisitions, as more
opportunities seem to surface. Transaction flow is expected to increase by at least 20 per cent from last
year. The currency is expected to appreciate against the US dollar due to consolidating growth prospects.

Banking sector
The fresh inflow of good news about the economy has not taken the financial sector by surprise. Traditional
lending and borrowing has been performing admirably for quite some time. While the previous year was
good in terms of overall profitability, this year is expected to be even better. Credit losses are likely to be
history very soon. On the investment side, the neighboring markets -- the source of strong export demand
-- appear to be attractive target markets. New funds and partnerships can be used to tap into these sources
of organic growth. General labor disputes from last year have come ashore the banking sector; banks can
expect rising costs and expressive rhetoric from labor organizations, which have promised to double down
on banks that do not take their personnel issues seriously.

Policy actions
One matter of great importance to the banking sector has been the ascent of the new regulatory framework.
While the key industry groups have spent considerable time and effort in educating the regulatory officials
of the needs that banks have, some of these wishes have fallen on deaf ears, and leaner times lay ahead. In
the upcoming few years, banks are required to put up more quality capital to support their base of risky
assets. As an additional note are the fresh policy actions by the state to consolidate the expected growth
path; a small decrease in the corporate tax rate has been enacted, and more importantly, the monetary
authority has kept its very accommodative policy stance.