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Economic growth is projected to contract in the last quarter of 2011, reflecting slowing world trade and the impact of the euro area debt crisis on confidence and domestic funding conditions. The subsequent gradual recovery will be supported by improvements in competitiveness, although ongoing budgetary consolidation will weaken domestic demand. The unemployment rate may peak at 23% in 2012, while weak growth will reduce inflation below 1% in 2013. The fiscal deficit is projected to decline from 9.3% of GDP in 2010 to close to 6% in 2011. The government’s deficit targets of 4.4% in 2012 and 3% in 2013 are assumed to be reached.
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