Growth is expected to turn positive in the course of 2014 and to strengthen in the following year as competitiveness improves further, world trade expands and investment rises. However, the required fiscal consolidation and weak bank balance sheets will restrain domestic demand. Very high unemployment will persist, keeping inflation negative.
Fiscal consolidation needs to continue as planned, given high debt levels, but automatic stabilisers should be allowed to work if activity turns out to be weaker than projected. The need for further debt relief to achieve fiscal sustainability cannot be excluded. Bank balance sheets need to be restructured to allow credit growth to resume. Product market reforms already undertaken should improve price competitiveness and reallocation of resources towards internationally-oriented activities, although further reform will be needed. A more efficient and fair tax system is also essential for growth and social inclusion.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.