Economic activity is expected to decline further in 2013 as problems in the banking sector, corporate debt overhang, a weak labour market and fiscal consolidation weigh on domestic demand. Better growth in export markets is projected to spur a weak recovery in 2014. Unemployment will rise further and, reflecting large and growing economic slack, inflation will remain subdued.
Fiscal consolidation should be continued to arrest the rapid rise in public debt, but the automatic stabilisers should be allowed to operate fully. Bank recapitalisation and restructuring is a priority to restore confidence and maintain access to international financial markets. This should go hand in hand with restructuring the highly leveraged corporate sector. Implementing planned privatisations and promoting FDI would enhance growth potential.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.
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