The economy recovered strongly, supported by large policy stimulus and an effective response to COVID-19, but some sectors hardest hit by border restrictions, notably tourism, lag behind. The pandemic highlighted a number of structural challenges. A key priority is to address the deteriorating access to affordable housing, which weakens financial resilience, hampers labour mobility and reduces inclusiveness.
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2021 Structural Reform Priorities
After a rebound in the second half of 2020 from the COVID-19 slump, economic growth in 2021 will average around 2¾ per cent, with rising unemployment weighing on private consumption and high uncertainty holding back business investment. Assuming that the border re-opens at the beginning of 2022 after a rollout of an effective vaccine around the world, tourism and immigration will drive further the recovery, with economic growth in 2022 of just over 2½ per cent. Until immunisation is attained, the recovery may be interrupted by intermittent localised COVID-19 outbreaks and associated containment measures.
The government should stand ready to deploy greater fiscal and monetary stimulus than currently assumed if the economic recovery falters. It should also strengthen measures to support the reallocation of workers from economic activities that are not viable in the long run to those that are.