The economy has expanded for sixteen consecutive years and the economic picture is, overall, very favourable. However, inflationary pressures have mounted and macroeconomic policy will need to stay relatively tight to ease demand pressure until a significant easing in inflation is in prospect. The new government has launched a vast reform programme to sustain strong growth over the medium term. Against this backdrop, this chapter will assess the recent performance of the economy, the short-term outlook and monetary and fiscal policy requirements. The chapter will then highlight the main structural policy challenges. These include reforming the education system, raising labour supply, reforming industrial relations and product markets, the latter including critical areas such as infrastructure and water management.