Despite the fast escalation of infections at the beginning of the year, GDP is projected to grow by 9.6% in 2021 and 4.5% in 2022, before slowing to 3.8% in 2023. Private consumption, driven by a gradual decline in the household saving ratio, the absorption of EU funds and investment will be the main drivers of growth. Inflation is expected to remain high in 2022.
Given the notable strength of the recovery, policies should be tightened if inflation pressures and overheating continue. Fiscal support should be withdrawn more rapidly than planned if necessary, while rapid developments in the housing market should be monitored and macro-prudential policy instruments adjusted if prices diverge excessively from fundamentals. The recovery is also exposing some entrenched imbalances in the labour market, where the lack of suitable labour despite a substantially higher unemployment rate than before the pandemic underscores skill mismatches, putting pressure on wages and inflation. Strengthening upskilling and reskilling programmes in line with employers’ needs will be key to addressing labour shortages.