Output growth of 4% in 2004 surpassed expectations and is projected to be marginally higher than that in 2005 and 2006. Growth in the export sector is expected to fall off somewhat but will nevertheless remain robust while household consumption spending is likely to pick-up. Though inflation is currently low, pressures are expected to build and are projected to be met with some tightening of the monetary stance in 2006.

Though the prospects for reaching the Maastricht criteria for euro entry are good, faster progress is needed in structural reforms to make fiscal consolidation sustainable in the longer term. More rapid progress is also needed in making improvements to the business environment.