The economy continues to show signs of overheating, as the large scale aluminium-related investment projects are in full swing and household demand is booming. The external deficit is soaring and inflation exceeds the authorities’ upper tolerance limit. The major challenge for policymakers is to ensure an orderly unwinding of the present imbalances and to prevent their recurrence in the future.
Prices and wage pressures have mounted. Further interest rate increases are probably required to put inflation on a downward track towards the 2.5% official target. Avoiding a premature loosening of the fiscal stance would reduce upward pressure on interest rates and help avoid excessive exchange rate fluctuations, thereby facilitating the stabilisation task of monetary policy.
|Population (000s), 2004||293|
|Area (000 sq km)||103|
|GDP (Billion USD), 2004||12.2|
|Life expectancy at birth (Women, Men), 2003 ||82.5, 78.7|
|Total labour force (000s), 2004||161|
|Government type||Constitutional Republic|
|Indicators||% change unless otherwise indicated|
|Consumer price index||3.9||4.0||3.4|
|Short-term interest rate (%)||9.2||11.0||9.8|
|Unemployment rate (%)||2.5||1.9||2.2|
|General government financial balance (% GDP)||2.0||1.2||-0.5|
|Current account balance (% GDP)||-12.1||-12.9||-10.5|
© OECD Observer
, No. 252, November 2005