Economic conditions are set to deteriorate further, with output projected to decline by 3.7% in 2009. Equity and property prices have tumbled, contributing to the erosion of financial sector balance sheets and impeding the supply of credit, thus restraining household and business spending. The government has introduced wide-ranging measures to address the financial sector, most recently providing substantive asset protection to address concerns about the value of assets on banks’ balance sheets. Monetary policy has eased dramatically and government borrowing is set to increase very significantly, reflecting a structural deterioration, the operation of automatic stabilisers and a discretionary fiscal stimulus of 1.4% of GDP, a large part of which was implemented quickly. These policy measures, the lower exchange rate and some improvement in the external environment should underpin a moderate recovery during 2010. The unemployment rate could rise to over 10%, while inflation is likely to stay well below the 2% target for an extended period.