GDP growth is projected to slow to 3.3% in 2005 owing to weaker exports but to recover to 4% in 2006 as both exports and domestic demand strengthen. Harmonised consumer price inflation in 2005 should be pushed up towards 3% because of the high weight of oil products but then it is expected to ease to less than 2% in 2006. Unemployment will come down a little, but most of the employment increase continues to come from abroad.

The growth recovery should be used to initiate structural reforms to put fiscal balances on a sustainable path, notably by reducing replacement rates in the very generous first pillar pension scheme.