GDP is projected to grow by 5.1% in 2021 and 3.4% in 2022, driven by domestic demand. Confidence is high and labour demand is strong. Rising incomes and a declining saving rate will support consumption. The unemployment rate will fall further. Nonetheless, restrictions continue to constrain some parts of the economy and insolvencies will rise from their current low levels. Until widespread vaccination is achieved, outbreaks may necessitate further restrictions.
The extraordinary fiscal stimulus of 2020 has begun to unwind but fiscal policy is still supportive. Monetary policy will remain accommodative. Policymakers should act early to provide more support if downside risks show signs of materialising. Facilitating the geographical mobility of workers across states would help the necessary reallocation of resources. Co-ordination across governments will also be important to limit the rebound of greenhouse gas emissions and to progress towards the decarbonisation objectives of the Paris Accord.