A gradual recovery is underway and economic growth is projected to reach 1.7% by 2017. The recovery will be driven mainly by historically low interest rates, lower oil prices, a pick-up in foreign demand and a weaker euro. Consumer confidence remains weak but the income tax reform, to enter into force in 2016, will boost private consumption.
Close supervision of banks, in particular those active abroad, is essential to revive confidence. Reform backlogs in services hinder competition and reduce other sectors’ prospects of benefiting from cost-efficient intermediate inputs and the diffusion of new technologies. Growth could be further strengthened and made more inclusive by removing remaining impediments that restrict the scope of the elderly, in particular women, to participate in work.
Greenhouse gas emissions have declined since 2005. However, low fuel prices compared to neighbouring countries encourage fuel exports and encourage transit traffic, which accounts for one-third of the country’s total transport emissions. Fuel taxes ought to be increased and tax breaks for CO2-emitting company cars and energyintensive industries should be phased out.