GDP growth is projected to exceed 10% in 2022, following the full relaxation of pandemic-related restrictions early in the year. Falling real incomes due to high inflation will hold back consumer spending up to mid-2023, despite significant wage growth. High costs and low confidence will reduce firms’ incentives to invest. Modified domestic demand will thus only grow by 0.9% next year, before rebounding by 3.1% in 2024.
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Improving activation and training policies is a top policy priority, as the pandemic especially affected sectors where many with weaker labour market attachment work. This can also help meet firms’ demand for skills. Reforming the tax and welfare system to remove high effective tax rates will boost participation and employment.
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2021 Structural Reform Priorities