Economic growth in 2015 remains weak, as uncertainty related to the reform programme and deteriorating liquidity conditions have undermined business confidence and investment. In 2016, growth will gain momentum and unemployment will decline somewhat as exports and investment recover while reform momentum is renewed. Deflation will continue in 2015 due to the very large degree of slack in the economy.
The debt burden will remain very high, and fiscal sustainability requires continued restraint for some time. Fiscal policy should aim at a small primary surplus. Reforms of the tax system and tax collection are essential to raise revenues, while further pension reforms would help contain spending. Structural reforms to lower barriers to competition and investment would boost exports and create more higher-quality jobs. Social policy reforms should aim at a fair sharing of the costs and benefits of adjustment.
The recovery of investment will depend critically on a return of business confidence and on stepping up the pace of structural reform implementation. Better access to credit is also essential. Stabilising the banking system by addressing the high level of non-performing loans is therefore critical.