Alongside a fast recovery from the COVID-19 pandemic, macroeconomic policies and high commodity prices have contributed to surging inflation, growing external imbalances and implicit liabilities. These vulnerabilities reduce the economy’s resilience to shocks. Anchoring inflation expectations remains a key challenge going forward. Making the regulatory framework more predictable and flexible would help to strengthen economic resilience. Strict regulations limit the entry of new firms, shielding incumbents from internal and external competition. Ensuring a rules-based, level-playing field for firms requires enforcing rules without exemptions. More flexible labour markets would create more high-quality formal jobs but should be accompanied by a comprehensive reform programme that shifts job loss protection to a broader-based unemployment insurance scheme and well-designed activation policies. Ramping up efforts to increase female employment is key to address high rates of non-participation of women. Equipping young people with relevant skills would allow to make the most of the demographic dividend while also addressing rising skill mismatches.

SPECIAL FEATURE: LABOUR MARKET, EDUCATION AND SKILLS