The economy is slowly coming out of recession. External demand is strengthening, although flat household purchasing power, weak consumer confidence and declining employment weigh on consumer spending. Growth will gather pace as the international environment brightens, pushing up exports, restoring confidence and eventually bolstering investment.
Fiscal policy is broadly neutral, which is appropriate given future public spending commitments, and despite weak activity. The automatic stabilisers should be allowed to continue to operate. Reforms to increase labour force participation and public sector efficiency are needed to ensure longer-term fiscal sustainability, as ageing is increasingly pushing up government spending.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.