Following a soft patch in the second half of 2012, growth is projected to pick up again to around 4% in 2013 and 2014, underpinned by increasing oil prices and easing headwinds from the euro area crisis. Gradual disinflation will continue after a temporary rebound of inflation due to the delayed increase of administrative prices and food price increases. The budget will be in surplus, but the non-oil deficit will remain substantial. The large current account surplus will diminish slowly.
Post-election budgetary spending pressures need to be contained. While the new fiscal rule will provide more stabilisation against fluctuations in oil revenues, a non-oil deficit rule would be a better anchor for a sound medium-term fiscal position. Monetary policy should target disinflation, while allowing the exchange rate to fluctuate and absorb shocks. Improvements in corporate governance and the business environment are essential for boosting output and increasing potential growth.