Send Print Tweet

Following a slowdown in late 2011, output growth is projected to pick up gradually, led by a rebound in exports as world trade gains momentum. Stronger exports will in turn boost domestic demand, helping to achieve output growth of 4% in 2013. With higher oil prices, the current account surplus is expected to fall to around 1½ per cent of GDP.

As the economy picks up, the central bank will need to raise its policy interest rate from the current level of 3¼ per cent to keep inflation near the mid-point of its 2 to 4% target range. The government should pursue its target of a balanced budget (excluding the social security surplus) by 2013. Sustaining growth over the medium term requires reforms to boost labour force participation in the face of demographic headwinds and to enhance productivity, particularly in services.