In 2023, global financial stability risks eased as inflation receded in several economies. However, geopolitical tensions and national elections in several advanced and emerging economies could adversely impact global growth and inflation, and affect trade policies. Risks from cyber incidents and climate change are also increasingly posing concerns for financial stability.

The domestic financial sector remained healthy throughout 2023. Overall, institutions remained well capitalized, and liquidity buffers were broadly stable. Asset quality and profitability ratios improved in some sectors.

Although the global financial system fared well in 2023 amid a gradual uptick in interest rates, financial fragilities remain. Some near-term risks include stresses in the commercial and residential real estate sectors and high correlation across asset markets. Over the medium term, vulnerabilities related to accumulating private and public sector debt could amplify the effects of deteriorations in debt servicing capabilities.

Domestic financial stability risks emanating from elevated international interest rates subsided, but other risks remain relevant over the near term. These risks relate to sovereign debt concentrations, increasing cyberattacks, lower liquidity buffers, and higher climate-related insurance costs.

Domestic economic activity held steady during the first nine months of 2023. An expansion in non-energy activity overshadowed a decline in the energy sector. The improved non-energy activity supported a marginal decline in the unemployment rate in 2023.

The Central Bank continued to promote financial stability through various legislative and regulatory initiatives, such as activating the additional Basel III capital buffer, continuing to build out the liquidity coverage ratio requirements, and issuing its cybersecurity and recovery planning guidelines.