After a sharp recession, the economy looks set to grow again on the back of a recovery in world trade, fiscal stimulus and easier monetary conditions. However, growth will be too weak to prevent further increases in the unemployment rate, one of the lowest in the OECD, until the end of 2010. As companies need to restore profitability they will continue to shed workers throughout 2010. The resulting improvements in profitability should lay the foundation for renewed investment growth and hence a more durable recovery in 2011. The fiscal stimulus has contributed to a budget deficit around 4.5% of GDP in 2009. To restore fiscal sustainability, the government should pursue its consolidation plan set to start in 2011. The planned two-step increase in the retirement age will help meet this objective but would be more effective with a phased-in implementation. Further focus on active labour market policies and easing of labour protection legislation would help stimulate employment growth.