Real GDP is projected to grow by 4.7% in 2025, 5.1% in 2026, and 5.8% in 2027. Private consumption is supported by a strong labour market and contained inflation, but investment has weakened as the execution of public infrastructure projects has slowed on the back of a corruption scandal linked to public works. Inflation is anticipated to fall to 1.6% in 2025, before gradually reverting to the mid-point of the central bank’s 2-4% target band as favourable food and energy price shocks fade and domestic demand recovers. Risks include a more persistent than expected weakness in public investment amid tighter corruption controls and further declines in investor confidence. The exposure to higher US tariffs is limited.

Monetary policy easing started late in 2024 and has room to continue as inflationary pressures remain subdued and growth will remain below trend in the near term. Fiscal policy is moderately restrictive but accelerating the pace of fiscal consolidation would help re-build fiscal buffers and place debt on a more prudent path. Regulatory reforms including lowering barriers to foreign investment and trade, fostering competition in electricity, telecommunications, and ports, and streamlining economy-wide regulations could raise investment and productivity.