Against the background of on-going fiscal consolidation, the economy continued to contract in 2013. As global conditions improve and domestic demand recovers, growth should resume slowly, with marginally positive growth projected for 2014. Following recent positive improvements in the labour market, the unemployment rate is expected to continue a gradual decline throughout the forecasting horizon. As economic slack remains sizeable, inflation is set to remain very low. The current account has moved into surplus, reflecting in part improvements in competitiveness, but also very weak domestic demand.
Successful fiscal consolidation will bolster confidence but the authorities should allow the automatic stabilisers to operate fully to avoid adverse feedback loops. To boost potential output, the government should continue with structural reforms.These should include moving forward with the corporate income tax reform to attract investment, improving the functioning of the judicial system and restructuring SOEs.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.