Sustained by strong exports and domestic demand, real GDP growth is expected to strengthen somewhat further this year, and remain close to 4½ per cent in 2007. However, employment has disappointed and the unemployment rate is not projected to fall below 7% despite moderate wage inflation. The new government should set more realistic fiscal targets and implement them rigorously. Otherwise there is a risk of financial turbulence that could prove costly for the economy. A stronger commitment to fiscal consolidation would not only reduce short-term risks but also help growth prospects over the longer term.