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GDP growth has been buoyant in recent quarters and is projected to be about 1½ per cent over the next two years. Domestic demand will gain strength, supported by household consumption. However, the boost to exports from the earlier exchange rate depreciation and one-off events will fade. The large current account surplus will narrow slightly. Inflation will pick up gradually but remain moderate.
Monetary policy rates are projected to start to increase in the second half of 2019 but to remain negative through 2020. The fiscal stance will become slightly expansionary as exceptional revenues unwind. Pension reform is urgent as population ageing weighs on pension system funding. Reducing the cost of childcare and expanding its supply could encourage women’s full participation in the economy.
1. The manufacturing Purchasing Managers Index is a survey-based leading indicator providing the prevailing direction of change: an index above 50 indicates an overall increase and below 50 an overall decrease in economic activity.
2. Excluding fresh and seasonal food products, energy and fuels.
Source: SECO; Thomson Reuters; and OECD Economic Outlook 104 database.
Chart data: http://dx.doi.org/10.1787/888933877297