Economic growth will slow sharply to 1.1% in 2022 and 0.6% in 2023 owing to the waning of the COVID 19 rebound and to the war in Ukraine. Private consumption will be depressed by falling real household incomes but should slowly recover from late 2023 as they begin to rise again. Headline inflation will fall slowly from a peak of 7% in late 2022. After dropping sharply this year, exports should accelerate next year as exporters find new markets and world trade picks up. The main downside risk is that a wage-price spiral develops, increasing inflation and reducing competitiveness and growth.
The pandemic laid bare pre-existing gaps in social safety net coverage. Improving the design and efficiency of unemployment benefits and more generally of public services in health, social care and childcare would boost growth and make it more resilient.
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2021 Structural Reform Priorities