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Growth has continued to slow, but GDP is being boosted by new offshore natural gas production. External demand will underpin activity in 2014, but the contractionary effects of a sharp fiscal consolidation will be substantial. Inflation is currently low, but price pressures may develop over the projection period in the light of relatively tight labour and product markets.

The new government has faced significant challenges in formulating the postponed budget for the second half of 2013 and 2014, even though the official deficit targets have again been made less ambitious. Remaining within the spending ceiling must be a priority alongside the implementation of revenue measures to keep the deficit on track. Monetary policy can remain accommodative for the time being, given low inflation, but consideration may have to be given to some tightening during 2014 should inflation move up toward the top of the target range.

Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.

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