The economic slowdown came to an end in mid-2005 and activity appears ready to accelerate in 2006, thanks to the impetus coming from export market growth. In addition, consumer expenditure will benefit from the introduction of tax cuts and improved labour market trends. Even though real GDP growth will rise above potential (of nearly 2%), the output gap will remain negative by the end of 2007. Thus, core inflation is projected to remain subdued, with headline inflation falling back as energy prices stabilise. Further fiscal consolidation through expenditure restraint is required to secure a sustainable path for public finances and continued government debt reduction. The amount of required consolidation can be reduced by implementing labour market measures that stimulate job creation and increase employment rates, which are low by international standards, particularly for older workers and among the younger generations.