In the absence of further major shocks, GDP growth is projected to be 5.7% in 2021 before easing to 3.4% in 2022. Following significant but unsustainable quasi-fiscal stimulus, changes to more sustainable macroeconomic policies late in 2020 were altered at the end of the first quarter of 2021, disrupting market sentiment and expectations. The surge in infections which appears to have peaked in May, new confinement measures and the gradual phasing out of job retention schemes will affect employment, incomes and private consumption from the second quarter of 2021.
For a more inclusive and sustained recovery structural challenges such as low labour force participation of women, widespread informality, weak skills, rigid employment rules hampering reallocation and large share of low-quality employment have to be addressed. The COVID-19 related contraction in economic activity affected informal workers the hardest, as many work in contact-intensive services such as tourism, catering and retail trade.
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2021 Structural Reform Priorities