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After slowing markedly over the course of 2011, activity stabilised in early 2012 as investor sentiment and financing conditions improved. Consumption and investment will continue to grow modestly in the near term and weakness in export demand persists. The economy is projected to return to trend growth by mid-2013 driven by improving global conditions that will strengthen exports and investment.

Strong tax revenues and expenditure restraint pushed the budget deficit below 3% of GDP in 2011 and a second consolidation programme will help reduce the deficit further after 2012. However, the financial sector poses fiscal and financial stability risks. Additional government support might be required and macroprudential policies should be carefully designed to ensure financial stability.