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Following a strong start at the beginning of the year, activity is set to pick up further as confidence improves and domestic demand strengthens. Strong labour market performance, low deleveraging needs and favourable financing conditions will contribute to the rebound in private consumption and investment over the projection period. The expected recovery of world trade should further improve business confidence and mitigate negative spillovers from weakness in the rest of the euro area.

As fiscal consolidation is on track, automatic stabilisers should be allowed to work unhindered to support domestic demand. Structural reforms to further improve business conditions and the innovation framework would strengthen economic performance and contribute to narrowing persistent current account imbalances by making the domestic sector more dynamic.