Private consumption and investment continue to grow briskly, while foreign trade will make a significant but modest contribution to growth. Unemployment is projected to recede only slowly, as integrating the substantial flow of immigrants takes time and labour force participation increases. Inflation is set to pick up gradually, as wages increase and the disinflationary effect of falling oil prices fades out.
Monetary policy is highly expansionary and should remain so until inflation is clearly moving towards target. Macro-prudential policies should be strengthened and complemented by measures to increase housing supply to reinforce financial stability. Fiscal policy is reverting towards a broadly neutral stance. Structural policies to improve immigrant integration, skills and innovation are needed to boost long-term growth.
Residential investment is growing rapidly from a low level, responding to strong housing demand. Business investment growth is robust. Intangibles, notably software and R&D, account for a large share of corporate investment. Public investment is increasing at a moderate pace, with a focus on enhancing rail and road infrastructure.