Mindful of the strong population ageing already underway, the COVID-19 recovery strategy needs to enhance labour force participation and spur business dynamism. Moreover, significant potential to expand use of digital technologies, in both the public and the private sector as well as education, should be seized.
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2021 Structural Reform Priorities
The COVID-19 shock in early 2020 triggered a major recession and real GDP is projected to shrink by around 5¼ per cent this year. The economy is gradually strengthening although growth remains sluggish. Ongoing difficulties in bringing COVID-19 infections under control hold back domestic demand. As restrictions are lifted in the near term, consumption is expected to recover, supported by government subsidies and incentives. In addition, recovering external demand, as the sanitary situation of trading partners improves, will sustain export growth. On the other hand, private investment is set to remain relatively subdued. Overall, GDP is projected to expand by 2¼ per cent in 2021 and 1½ per cent in 2022, assuming further economic stimulus.
Fiscal policy reacted forcefully to the sanitary shock, and has subsequently been balancing the needs of protecting households by keeping infection rates low with reactivating businesses adversely affected by the pandemic. However, without any action beyond the measures currently in place, the recovery may slow. A resilient and sustainable economic expansion will require further policy support and structural reforms.