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Growth is projected to pick up to about 3%, as lower interest rates, stronger infrastructure spending, lower corporate taxes and higher oil prices all boost investment. Private consumption will also strengthen, as falling inflation lifts real wages. Exports will improve on the back of a stronger outlook for trading partners. Unemployment will start to fall. Social indicators are improving, but informality and inequality remain high.
The current monetary policy stance is appropriate given current inflation, but a somewhat more accommodative monetary policy would be needed if inflation and inflation expectations continue to fall. Fiscal policy strikes an adequate balance and will need to remain moderately prudent so that the deficit declines gradually, in line with the fiscal rule. Significant social spending needs may require raising more revenue over time. Productivity would be boosted by reforms to improve the business environment and the quality of education. Further efforts to reduce labour market informality, such as by reducing non-wage labour costs, and to reduce gender gaps, by expanding the provision of childcare, would make growth more inclusive.