Growth is projected to strengthen as a moderate recovery in the euro area improves the outlook for energy exports and domestic demand accelerates due to increasing real incomes. Inflation surged as administrative and food prices increased but will gradually decline towards the policy target range of 5-6% as this effect fades. The current account surplus will continue to diminish.
The newly adopted oil-based fiscal rule will drive fiscal policy and force hard choices among announced spending priorities: modernising the army, strengthening social protection and investing in infrastructure. Short-term monetary policy rates should remain on hold, but further improvements in the monetary policy framework should aim at reducing inflation expectations and long-term interest rates. A better business climate will be essential to encourage investment, make the economy less dependent on commodity prices and increase medium-term growth.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.
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