A recovery in 2006 signals an end to four and a half years of near stagnation. The main driving forces have been strong export market growth, easy credit conditions, reform-led employment growth and improving confidence. Growth is likely to slow in 2007 partly due to policy tightening, but rebound by 2008.
The 2007 fiscal consolidation rests, for the most part on projected revenue hikes, which might increase work and investment disincentives. Containment of spending pressure is therefore needed, notably in the pension, public employment, local authorities and health areas as indicated in the government’s own medium term plan. To keep inflation under control, it will be important to fully implement announced product market reforms. More decentralised wage setting could further help to recoup past competitiveness losses.
|Population (000s), 2005||58 135|
|Area (000 sq km)||301|
|GDP (Billion USD), 2005||1 666.4|
|Life expectancy at birth (Women, Men), 2003 ||82.5, 76.8|
|Total labour force (000s), 2004||24 451|
|Indicators||% change unless otherwise indicated|
|Household savings ratio||10.2||9.5||10.0|
|Consumer price index||2.2||1.9||2.0|
|Short-term interest rate (%)||3.1||3.8||4.0|
|Unemployment rate (%)||7.1||6.8||6.5|
|General government financial balance|
|Current account balance (% GDP)||-2.2||-2.2||-2.6|
No. 258/259, December 2006