Economic growth is projected to recover to about 5.9% in 2021 and 5.4% in 2022, and moderate to a still robust 3.2% in 2023. Domestic demand will be the main driver of growth. Higher real incomes will boost private consumption. Investment will increase on the back of increasing capacity constraints and larger inflows of EU funds. Headline inflation will rise, and reach 3% by 2023, reflecting high energy prices, supply side constraints and a tighter labour market.
Several long-standing vulnerabilities risk slowing down the recovery. Lowering labour taxes should be a priority. Currently, low-skilled workers have few incentives to enter employment or increase work efforts as high-income taxes erode income gains. Another concern is the relatively high share of state-owned enterprises, present across all sectors, which hinder competition and reallocation of resources to most productive firms during the recovery.
©Shutterstock/Anton PetrusRead full country note
2021 Structural Reform Priorities