An export-led recovery began in 2013 and is expected to gather pace in 2014 as world trade strengthens, reversing the two-year decline in private investment. Stronger consumer confidence and higher real income growth should raise private consumption growth. However, only in 2015 will the pace of GDP growth start to reduce economic slack and the unemployment rate.
A slightly supportive fiscal policy stance is appropriate, as fiscal consolidation at this point could derail the fragile recovery. Once the recovery is solidly in place, measures to secure fiscal sustainability should be adopted. The central bank started intervening in the foreign exchange market late in 2013, judging that unconventional monetary policy was needed to preserve the credibility of the inflation target in the face of a prolonged period of low inflation and the threat of deflation. The authorities should return to the floating-rate policy as soon as deflation risks have definitively receded. Active labour market policies should be enhanced to avoid unemployment becoming entrenched.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.