Modest wage growth, needed to restore international competitiveness, and only gradually accelerating employment account for the delayed return of private consumption to trend growth. The unemployment rate will increase temporarily as a consequence of supply-side reforms, helping core inflation to edge down further.There is a risk that the additional labour supply resulting from the current social benefit reforms may not be fully absorbed at current wage rates. Hence, the government should complement these reforms with measures increasing wage flexibility, aimed at enhancing employment prospects for lowskilled workers. The general government budget deficit reached 3.2% of GDP in 2003 and needs to come down to 3% or less by no later than in 2005. It is likely that this goal will be achieved in 2004.

Population (000s), 2003	16 224
Area (000 sq km)	41
Currency	Euro
GDP (Billion USD), 2003	512.7
Life expectancy at birth (Women, Men), 2002	80.7, 76.0
Total labour force (000s), 2003	8 287
Government type	Constitutional Monarchy

Indicators	% change unless otherwise indicated
	2004	2005	2006
GDP growth	1.2	1.2	2.4
Household savings ratio	10.7	10.7	9.9
Consumer price index	1.3	2.1	1.6
Short-term interest rate (%)	2.1	2.1	2.7
Unemployment rate (%)	4.9	5.2	5.0
General government financial balance (% GDP)	-2.9	-2.7	-1.9
Current account balance (% GDP)	4.2	4.2	4.4

Source: OECD© OECD Observer No 245, November 2004