GDP is already above potential, but growth is set to continue at 3% in 2006 and 2½ per cent in 2007, with all demand components growing solidly. However, with capacity constraints already visible and wage and price inflation set to pick up in due course, domestic firms are likely to lose market share. Expansionary monetary conditions are currently adding stimulus to the already buoyant economy. Hence, fiscal policy should be tighter and it is urgent to increase labour supply both by strengthening work incentives and by making it easier for foreigners to enter sectors like construction.