Since end-2011, monetary and fiscal stimuli have supported a gradual recovery, although short-term indicators point to significant uncertainties. The unemployment rate remains at record-low levels. After several years inside the tolerance band, inflation has crossed 6.5%, which is the upper limit of the target tolerance band to be met at year-end, and inflation expectations for 2013 and 2014 remain above the inflation target of 4.5% (the mid-point of the band). Portfolio capital inflows have receded and macroprudential measures that had been put in place to manage them have been relaxed.
The monetary policy rate was raised in April, and in the projection is assumed to rise further to bring inflation back towards the inflation target by the end of 2014. To spur growth, structural constraints need to be reduced through better infrastructure, a lower tax burden, less tax complexity and a further deepening of private long-term financial markets. Measures that reduce import competition are likely to harm medium-term productivity growth and should be reconsidered.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.
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