The long-awaited recovery was confirmed in 2006 as GDP grew by nearly 2%. Buoyant export markets and quality improvements by Italian exporters gave rise to solid export gains, which then stimulated domestic demand and jobs growth. Growth should remain strong in both 2007 and 2008 so long as foreign demand stays robust and restructuring continues. The output gap will narrow rapidly given that potential output growth is estimated to be less than 1½ per cent, and inflation could rise somewhat.