Growth is projected to accelerate in 2013 as improving external conditions give a boost to exports. While public investment will contract, private investment will pick up, driven by rising capacity utilisation and the planned modernisation of energy and transport infrastructure. Private consumption growth will be underpinned by increasing employment and wages. Headline inflation will continue to fall due to softening commodity prices, even while domestic price pressures are strengthening.
The fiscal position is sound, but the policy framework should be strengthened by introducing a multi-year spending ceiling and an independent fiscal council, as planned by the government. Further investments in active labour market policies and life-long learning are needed to overcome skills mismatches.