Real GDP growth reached 6% in 2005, with a very large contribution from net exports, and is projected to fall to 5¾ and 4¾ per cent in 2006 and 2007 respectively. While private consumption growth is expected to strengthen and exports to remain buoyant, this effect will be outweighed by accelerating imports. Higher consumption growth will add to inflationary pressures, along with increases in indirect taxation and regulated prices. The government deficit has come in below 3% for two years running but is expected to increase in 2006 and 2007. Adjustments to the budgeting system are needed to ensure appropriate treatment of windfall revenues in the Medium Term Spending Framework and changes are required to the rules on carry over spending. In addition, more progress on pension and health care reform is necessary to put government balances on a more sustainable track over the longer term.