The economy expanded strongly once again during most of 2007, reflecting strong growth in the financial-services sector. The global financial turmoil has been taking its toll since the end of the year, as investors became more cautious and lower equity prices hit commission fees, weakening activity in 2008. Assuming a gradual normalization of financial markets, growth should return toward potential. Domestic demand is projected to remain relatively strong, boosted by fiscal measures. Unemployment is set to increase, while inflation should remain high as the rapid rise in oil and food prices is likely to feed into core inflation through higher wages.