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Robust output growth is projected on the back of a rebound in exports and continued strength in domestic demand. Private consumption will keep growing steadily in 2018, thanks to a rise in earnings and employment. Inflation is expected to rise as spare capacity shrinks.
The economic recovery and past consolidation measures have stabilised the public finances. Nevertheless, rising ageing-related costs and tax cuts to alleviate the impact of the Competitiveness Pact on household income prevent the budget deficit from shrinking further. Increasing employment by enhancing work incentives and increasing efficiency in public services is essential to boost growth and maintain the government debt-to-GDP ratio on a downward trend.